LABOR  AND  OTHER  CAPITAL 


THE  BIGHTS  OF  EACH  SECURED 


AND 


THE  WRONGS  OF  BOTH  ERAJ)ICAr 


OR, 


AN  EXPOSITION  OF  THE  CAUSE  WHY  FEW  ARE  WEALTHY  AND  MANY  POOR,  AND 

THE  DELINEATION  OF  A  SYSTEM,  WHICH,  WITHOUT  INFRINGING  THE 

RIGHTS  OF  PROPERTY,  WILL  GIVE  TO  LABOR  ITS  JUST  REWARD. 


BY  EDWARD  KELLOGG, 

it 

AUTHOR  OF  "CURRENCY,  THE  EVIL  AND  THE  REMEDY." 


NEW  YORK: 
PUBLISHED    BY    THE    AUTHOR, 

AND  FOR  SALE  AT  NO.  47  STONE-STREET. 

PRINTED  BY    OKO.    W.    WOOD,    NO.  39   GOLD-STREET. 
1849. 


V 


Entered,  according  to  the  Act  of  Congress,  in  the  year  1849,  by 
EDWARD  KELLOGG, 

In  the  Clerk's  Office  of  the  District  Court  of  the  United  States  for  the 
Southern  District  of  New  York. 


TABLE  OF  CONTENTS. 


PREFACE Page  11 

INTRODUCTION. 13 

PART   I. 

PRINCIPLES    OF    DISTRIBUTION. 

CHAPTER  I. 
Of  Value 37 

CHAPTER  II. 

MONEY,    THE    MEDIUM    OF    DISTRIBUTION. 

SECTION  I. 
The  Nature  and  Properties  of  Money 41 

SEQTION  II. 
The  Power  of  Money  to  Represent  Value 42 

SECTION  III. 
The  Power  of  Money  to  Measure  Value 51 

SECTION  IV. 
The  Power  of  Money  to  Accumulate  Value  by  Interest 54 


IV  CONTENTS. 

** 

SECTION  V. 
The  Power  of  Money  to  Exchange  Value Page     63 

SECTION  VI. 

The  Material  of  Money,  and  the  Distinctions  between  Money  and 
the  Material  of  which  it  is  made • 65 

CHAPTER  III. 

THE    RATES    OF    INTEREST    THE    GOVERNING    POWER    OF    DISTRIBUTION   TO 
LABOR    AND    CAPITAL. 

SECTION  I. 

The  Power  of  Capital  to  accumulate  Property  and  Labor,  according 
to  the  Rate  of  Interest 74 

SECTION  II. 
Of  the  Wealth  of  Cities,  and  the  Means  of  its  Accumulation 91 

SECTION  III; 

Of  the  Interest  received  by  the  Citizens  of  the  City  of  New  York  on 
Loans  to  the  Country 101 

SECTION  IV. 

The  per  centage  actual  increase  of  the  value  of  the  Property  of  the 
States  of  New  York  and  Massachusetts,  compared  with  the  per 
centage  legal  increase  on  the  property  of  these  States  for  the  same 
periods 105 

SECTION  V. 
Foreign  Debts 112 

SECTION  VI 

No  accumulation  of  Property  by  Labor  equal  to  the  accumulation  by 
the  Loan  of  Money  at  seven  per  cent  interest. 117 


CONTENTS.  IT 

SECTION  VII. 
Two  per  cent  per  annum  too  high  -a  rate  of  interest Page  126 

SECTION  VIII. 

The  reduction  of  Interest  would  be  an  equal  benefit  to  the  Producing 
Classes,  whether  Property  should  rise  or  fall  in  price,  in  conse- 
quence of  such  reduction 129 

SECTION  IX. 
Effects  upon  Producers  of  high  and  fluctuating  rates  ol  interest. . . .   132 

SECTION  X. 

The  oppression  of  labor  by  a  monopoly  of  land  not  so  great  as  the 
oppression  by  high  rates  of  interest  on  money 138 

SECTION  XI 

The  rate  of  interest  determines  the  price  of  property,  and  a  rise  of 
interest  increases  the  power  of  money  to  command  property 143 

SECTION  XII. 

The  rise  of  the  rate  of  interest  increases  the  liabilities  of  all  debtors  145 

i 

SECTION  XIII. 

Rents,  whether  high  or  low,  bear  the  same  relative  value  to  their 
principal ;  but  when  the  per  centage  interest  on  money  is  increas- 
ed, its  relative  proportion  to  the  principal  is  not  only,  increased,  but 
each  fractional  part  has  increased  value 148 

SECTION  XTV. 

To  cheapen  prices  by  an  unjust  rate  of  interest  and  a  scarcity  of 
money,  is  but  to  cheapen  the  labor  of  all  producers,  and  give  their 
earnings  to  the  capitalist  without  an  equitable  equivalent 151 


Yl  CONTENT? 

SECTION  XV. 
General  remarks  upon  interest • Page  155 

SECTION  XVI. 
Estimate  of  a  just  rate  of  interest 158 

SECTION  XVII. 

Beneficial  results  to  laborers  and  merchants  from  the  reduction  of  the 
rate  of  interest 160 

SECTION  XVIII. 

The  low  prices  of  labor  in  European  countries  not  caused  by  their 
low  rates  of  interest 166 

CHAPTER  IV. 

THE    BANKING    SYSTEM. 

SECTION  I. 

The  nature  of  banks,  their  institution,  and.  the  principles  by  which 
they  are  governed * 176 

SECTION  IL 

Of  the  amount  of  specie  owned  by  banks,  and  the  interest  paid  by 

the  people  on  their  issues  and  loans • 187 

.  • 

SECTION  III. 
Basis  of  the  Bank  of  England 195 


SECTION  IV. 

a 

Of  the  balancing  power  of  bank-notes  and  deposits. 


CONTENTS.  Til 

SECTION  V. 

Of  the  management  of  banks,  and  the  effects  of  their  operation  upon 
the  prosperity  of  trade  and  productive  industry Page  200 

SECTION  VI. 
Remarks  on  the  repeal  of  the  Usury  Laws 225 

SECTION  VIL 
A  well  regulated  currency  impossible  under  present  laws.. .........  229 

CHAPTER  V. 

The  amount  of  a  currency  should  be  limited  only  by  the  wants  of 
business 232 

CHAPTER  VI. 

The  necessity  of  credit,  and  its  extensive  use  in  the  transaction  of 
business 236 

CHAPTER  VIL 
Of  the  security  of  a  paper  currency 238 

CHAPTER  VIII. 

Objections  to  a  paper  currency  on  account  of  foreign  trade  considered  242 
RECAPITULATION ,  .  248 


Till  CONTENTS. 


PART   II. 

THE  INSTITUTION  OF  PAPER   MONEY,  AND  ITS  CAPABILITY 
TO   REMEDY  THE   EVILS  OF   OUR   PRESENT   CURRENCY. 

CHAPTER  I. 

/ 

THE    SAFETY    FUND. 

SECTION  I. 
The  formation  of  money,  and  the  mode  of  issue.. Page  250 

SECTION  II. 
The  security  of  the  Safety  Fund  money 255 

SECTION  III. 
The  rate  of  interest  on  the  Safety  Fund  money 260 

SECTION  IV. 
Organization  and  management  of  the  Safety  Fund. 263 

SECTION  V. 
The  probable  amount  of  Safety  Fund  issues 266 

CHAPTER  II. 
The  advantages  of  the  Safety  Fund  money  over  specie 268 

CHAPTER  III. 

Sundry  objections  to  the  Safety  Fund — its  effects  on  our  banking  in- 
stitutions,  etc.,  considered 272 

-'     9- 


IX 

CHAPTER  IV. 

Advantages  of  the  Safety  Fund Page  279 

CONCLUSION 290 

APPENDIX. 

The  French  Revolution  of  1848..  . .     295 


PREFACE. 


THE  laboring  classes  of  all  civilized  nations  have  been, 
and  are,  as  a  body,  poor. '  Nearly  all  wealth  is  the  pro- 
duction of  labor  ;  therefore,  laborers  would  have  possessed 
it,  had  not  something  intervened  to  prevent  this  natural 
result.  Even  in  our  own  country,  where  the  reward  of 
labor  is  greater  than  in  most  others,  some  cause  is  opera- 
ting with  continual  and  growing  effect  to  separate  pro- 
duction from  the  producer.  The  wrong  is  evident,  but 
neither  statesmen  nor  philanthropists  have  traced  it  to  its 
true  source  ;  and  hence  they  have  not  been  able  to  pro- 
ject any  plan  sufficient  for  its  removal. 

The  design  of  the  present  volume  is  to  show  the  true 
cause ;  and  to  illustrate  its  operation  so  plainly  and  vari- 
ously, that  any  ordinary  rnind  may  easily  perceive  how  it 
has  produced  and  continued  this  unnatural  oppression  of 
laborers.  It  will  also  be  shown,  with  equal  clearness,  that 
a  simple  and  effectual  remedy  can  be  applied  to  the  re- 
moval of  the  evil.  A  good  government  must  have  some 


XU  PREFACE. 

system  by  which  it  can  secure  the  distribution  of  property 
according  to  the  earnings  of  labor,  and  at  the  same  time 
strictly  preserve  the  rights  of  property :  and  no  govern- 
ment, whether  republican  or  not,  that  fails  in  these  par- 
ticulars, can  ensure  the  freedom  and  happiness  of  the 
people  and  become  permanent.  The  plan  proposed  to 
secure  this  distribution  is  obviously  safe  and  certain; 
and  it  contemplates  no  agrarian  or  other  similar  distribu- 
tion of  property,  nor  any  interference  in  contracts  be- 
tween laborers  and  capitalists,  or  in  the  usual  course  of 
business.  Fulfilling  these  requirements,  it  can  hardly  fail 
to  recommend  itself  to  all  thinking  men.  Therefore,  it  is 
confidently  believed  that  when  the  plan  shall  become  gen- 
erally known,  it  will  be  quickly  put  into  operation,  and 
thus  save  the  producers  of  this  nation  from  the  oppres- 
sion, degradation  and  misery  which  have  befallen  the  la- 
boring classes  of  all  other  countries. 


INTRODUCTION. 


THE  principles  advanced  in  this  treatise  with  regard  to 
the  compensation  of  labor,  are  essentially  different  from 
those  which  have  been  advocated  by  former  writers  upon 
political  economy.  They  are  the  results  of  the  reflections 
of  one  who  has  had  extensive  acquaintance  with  the  vicis- 
situdes to  which  labor  is  liable,  and  who  has  endeavored, 
by  patient  investigation,  to  trace  them  to  their  true  cause, 
and  discover  an  effectual  and  practical  remedy  for  them. 
The  facts  of  the  volume  are  manifest ;  and  the  truth  and 
soundness  of  the  principles  and  arguments  are  open  to  the 
examination,  and  invite  the  scrutiny  of  the  reader. 

A  thorough  treatise  upon  the  compensation  of  labor, 
must  develop  the  laws  which  govern  the  award  of  the  pro- 
ducts of  labor.  Laws  are  spiritual  and  invisible.  The 
effects  of  all  laws  relating  to  matter  are  visible,  or  capable 
of  sensible  demonstration.  For  instance,  by  the  law  of 
gravitation,  all  bodies  tend  toward  the  earth.  The  ef- 
fect produced  is  visible,  but  the  law  itself  can  be  perceived 
only  by  the  understanding.  We  reason  from  known  facts 
to  the  hidden  power  governing  them.  The  value  of  any 
law  or  system  may  be  estimated  by  the  benefits  which 
naturally  flow  from  its  operation.  If  a  machine,  made  for 

2 


XIV  INTRODUCTION. 

the  manufacture  of  a  certain  article,  either  will  not  pro- 
dace  the  article,  or  produces  it  in  an  imperfect  state, 
the  inventor  and  all  others  are  at  once  convinced  that 
there  is  some  defect  in  the  contrivance,  or  in  the  construc- 
tion of  the  machine ;  and  we  know  that  until  the  error  is 
ascertained  and  rectified,  the  machine  will  be  incapable  of 
fulfilling  its  design,  and  making  a  perfect  article.  But  if 
the  article  produced  be  perfect  in  all  its  parts,  we  are  as- 
sured that  the  machine  is  also  perfect,  and  fulfills  the  de- 
sign of  its  inventor.  Political  Economy  embraces  the 
science  and  administration  of  law  for  securing  to  all  their 
rights — that  is,  for  securing  to  them  the  conditions  requi- 
site to  the  development  of  their  various  capabilities.  It 
considers  the  physical  wants  of  man,  and  enacts  laws  to 
protect  productive  industry,  and  furnishes  a  medium  for 
the  distribution  of  products ;  it  provides  for  his  mental 
capabilities,  by  placing  within  his  reach  the  means  of  ed- 
ucation ;  and  for  his  social  and  moral  capacities,  by  laws 
touching  social  intercourse,  and  by  the  establishment  of 
penalties  for  infringements  of  individual  rights.  The  nat- 
ural result  of  wise  laws,  judiciously  administered,  or  of  a 
sound  system  of  political  economy,  would  be  the  general 
diffusion  of  the  conditions  requisite  to  develop  man's  whole 
nature. 

One  of  the  chief  objects  for  which  governments  are 
constituted,  is  to  ensure  the  protection  of  the  rights  of 
property.  The  security  of  these  rights  is  essential  to  the 
welfare  of  a  people.  Their  infringement  is  the  cause  of 
nearly  all  legal  procedures.  Such  crimes  as  theft,  gambling, 
fraud  in  business^  bribery  in  courts  of  law,  &c.,  consist  in 
unjustly  obtaining  property  without  rendering  an  equiva- 


INTRODUCTION.  V 

lent.     To  obtain  labor  without  rendering  a  fair  equivalent, 
is  also  a  violation  of  the  rights  of  property. 

[Property,  value,  or  capital,  is  anything  which,  either  by 
combination,  or  inherently,  possesses  the  means  of  afford- 
ing support,  comforts,  or  luxuries  to  man.  Labor  is  a  spe- 
cies of  capital,  and  a  most  important  one — without  which, 
all  other  kinds  of  capital  would  be  nearly  if  not  wholly 
useless ;  for  even  food  of  spontaneous  growth  could  riot  be 
gathered  without  labor.  Labor  is  not,  however,  generally 
considered  as  capital,  but  as  something  very  inferior  to 
property  and  products.  I  have,  therefore,  found  it  con- 
venient, in  compliance  with  popular  usage,  to  speak  of 
labor  and  capital  as  distinct  from  each  other.  Capital, 
throughout  the  treatise,  signifies  all  property  but  labor,  or 
ability  to  labor.] 

Property  is  almost  entirely  the  product  of  labor.  Labor 
has  effected  every  improvement  in  our  country ;  it  has 
built  our  cities ;  cleared,  fenced,  and  improved  our  farms ; 
constructed  our  ships,  railroads  and  canals.  In  short, 
every  comfort  of  life  is  the  fruit  of  past  or  present  labor. 
To  appreciate  more  fully  the  value  of  labor,  suppose  the 
laborers  in  this  or  in  any  other  civilized  nation  to  remain 
idle  for  the  brief  term  of  five  years,  and  subsist  upon  the 
spontaneous  productions  of  the  earth.  Let  the  manufac- 
turer cease  to  toil,  commerce  be  suspended,  and  gold  and 
silver,  however  abundant,  and  however  pure  and  malleable, 
would  cease  to  be  precious  to  a  starving  people,  compared 
with  food,  and  with  the  labor  of  man,  which  produces  it. 

A  moderate  amount  of  labor  readily  produces  an  abun- 
dant supply  of  necessaries  and  comforts  for  man ;  but  the 
present  distribution  of  these  products  is  such,  that  a  large 


XVI  INTRODUCTION. 

number  of  those  who  labor  much  more  than  their  share  in 
the  production,  receive  a  very  small  proportion  of  the  pro- 
ducts, while  the  larger  proportion  accumulates  in  the  pos- 
session of  those  who  are  employed  neither  in  producing, 
nor  in  distributing  them.  The  greater  portion  of  the  hu- 
man family  toil  day  by  day  for  a  scanty  subsistence,  and 
are  destitute  of  the  time  and  means  for  social  and  intellec- 
tual culture.  The  industrious  poor,  as  a  class,  do  not  ob- 
tain even  a  competence.  Their  destitution  often  induces 
them  to  trespass  against  existing  laws,  to  obtain  a  small 
proportion  of  that,  which,  under  just  laws,  would  be  abun- 
dantly awarded  to  them  as  a  fair  compensation  for  their 
labor.  All  candid  men  will  acknowledge  this  truth,  that 
wealth  is  not  distributed  in  accordance  with  either  the 
physical  or  the  mental  usefulness  of  those  who  obtain  it. 
Opposed  to  the  masses  who  live  in  toil  and  poverty,  is  a 
small  proportion  of  the  human  race,  surrounded  by  all  the 
appliances  of  luxury,  and  living  in  comparative  idleness  ; 
while  their  abundant  means  of  social  and  intellectual  cul- 
ture are  too  often  neglected,  or  rendered  useless  by  indo- 
lence and  self-indulgence.  These  extremes  of  wealth  and 
poverty,  of  luxury  and  want,  of  idleness  and  labor,  are 
great,  somewhat  in  proportion  to  the  antiquity  of  the  na- 
tion, or  the  length  of  time  that  a  certain  law,  or  system, 
has  been  in  operation. 

In  all  ages  and  nations,  philanthropic  men  have  endeav- 
ored to  devise  some  means  of  securing  to  labor  a  better 
compensation.  Labor-saving  machines  have  been  invent- 
ed ;  associations  have  been  formed  for  the  purpose  of  pro- 
ducing with  less  labor,  the  earnings  being  equitably  dis- 
tributed according  to  the  work  performed.  But  these 


INTRODUCTION. 


benevolent  efforts  have  failed  of  any  general  success.  The 
reason  is  this  :  no  individuals,  nor  associations  of  individ- 
uals, can  withdraw  their  labor  or  their  products  from  the 
influence  of  the  national  laws  which  regulate  distribution. 
Every  few  years  there  is  a  season  of  great  distress,  and 
more  than  usual  poverty  among  producers.  This  distress 
is  seldom  occasioned  by  a  scarcity  of  products.  More 
frequently  the  manufacturer  has  goods  which  he  cannot  sell 
at  the  cost  of  their  manufacture  ;  the  farmer  has  grain 
for  which  there  is  little  or  no  market.  While  this  supera- 
bundance of  products  continues,  the  laborer  can  obtain  no 
employment.  Himself  and  his  family  are  destitute  of 
food,  clothing  and  shelter,  and  have  no  means  of  paying 
for  them.  If  all  this  suffering  be  caused  by  over-production^ 
public  measures  should  be  taken  to  avert  the  calamity,  by 
preventing  an  excess  of  labor.  This  work  will  exhibit  the 
cause  of  one  curious  fact,  which  is,  that  at  the  times  when 
the  amount  of  surplus  products  is  a  subject  of  national 
lamentation,  producers  are  often  destit^u  and  capitalists, 
who  do  little  or  nothing  toward  production  or  distribution, 
are  supplied  with  all  the  comforts  and  luxuries  of  life,  at 
half,  or  less  than  half  the  usual  price. 

In  the  various  States,  a  tax  is  levied  to  provide  schools 
for  the  children  of  the  laboring  classes.  Under  existing 
laws,  this  species  of  charity  is,  doubtless,  very  important. 
But  wealth  being  the  product  of  labor,  the  laborers  should 
have  abundant  means  to  educate  their  children;  and  if 
a  fund  be  established  for  the  purposes  of  education,  it 
should  be  necessary  for  those  only  who  are  unable  or  un- 

willing to  labor.     It  is  unreasonable  for  laws  to  be  such 

3 


XViii  INTRODUCTION. 

as  to  compel  the  producers  of  wealth  to  ask  alms  of  non- 
producers. 

The  wealth  of  this  nation,  like  the  wealth  of  other  na- 
tions, is  rapidly  accumulating  in  the  hands  of  a  compara- 
tively few  people  in  our  large  cities.  Still  it  is  indisputa- 
ble, that  cities  are  great  consumers  of  wealth,  while  they 
are  comparatively  small  producers. 

In  all  probability,  one  thousand  of  the  most  wealthy 
citizens  of  the  city  of  New  York,  own  a  greater  amount  of 
real  and  personal  property,  than  the  whole  remainder  of  its 
inhabitants.  Their  wealth  is  vested  in  real  estate  in  the 
city  and  country,  in  bank,  railroad,  State,  and  other  stocks, 
loans  of  money,  &c.  Allow  five  persons  to  form  a  family, 
and  the  one  thousand  men  and  their  families  would  form  a 
population  of  five  thousand,  or  one  and  one-quarter  per  cent 
on  four  hundred  thousand,  the  present  population  of  the 
city.  Upon  this  estimate, — and  a  little  observation  and  re- 
flection will  show  that  it  is  not  an  extravagant  one, — one 
and  one-quarter  per  cent  of  the  population  are  worth  as 
much  as  the  remaining  ninety-eight  and  three-quarters  per 
cent.  Take  the  disproportion  of  wealth  on  a  greater  amount 
of  population.  We  may  reasonably  estimate,  that  a  hundred 
thousand  of  the  wealthiest  men  in  the  United  States,  own 
as  much  real  and  personal  property  as  the  whole  remain- 
der of  the  nation.  Allowing  five  persons  in  a  family,  these 
hundred  thousand  men,  with  their  families,  make  a  popu- 
lation of  five  hundred  thousand,  or  two  and  a  half  per  cent 
on  twenty  millions^  the  present  population  of  the  country. 
This  calculation  will  make  two  and  a  half  per  cent  of  the 
population  own  as  great  an  amount  of  wealth  as  the  re- 
maining ninety-seven  and  a  half  per  cent. 


INTRODUCTION.  XIX 

Our  government  professes  to  found  its  laws  on  republi- 
can principles,  which  laws,  if  just,  and  justly  administered, 
should  secure  to  every  individual  a  fair  equivalent  for  his 
labor ;  yet  probably  one-half  of  the  wealth  of  the  nation  is 
accumulated  in  the  possession  of  but  about  two  and  a  half 
per  cent  of  the  population,  who,  to  say  the  most,  have  not 
done  more  labor  toward  the  production  of  the  wealth  than 
the  average  of  the  ninety-seven  and  a  half  per  cent,  among 
whom  is  distributed  the  other  half  of  the  wealth. 

Let  those  who  doubt  whether  two  and  a  half  per  cent 
of  the  population  own  one-half  of  the  property  of  the  na- 
tion, select  in  their  own  neighborhood,  or  in  a  village  con- 
taining, say,  four  thousand  inhabitants,  the  twenty  most 
wealthy  men,  and  see  if  the  twenty  are  not  worth  as  much 
as  all  the  rest.  Or,  if  the  village  contain  temthousand  in- 
habitants, take  the  fifty  most  wealthy  men,  and  see  if  they 
are  not  worth  as  much  as  all  the  rest.  Allowing  the  fam- 
ilies of  the  fifty  men  to  average  five  persons  each,  they 
would  amount  to  two  hundred  and  fifty  individuals — just 
two  and  a  half  per  cent  of  the  population.  If  it  be  found 
that  the  fifty  men  and  their  families  own  one-half  of  the 
property,  then  see  if  they  have  contributed  more  labor 
physically,  intellectually,  or  morally,  for  the  general  bene- 
fit, than  the  rest  of  the  villagers.  I  do  not  now  speak  of 
what  their  wealth  may  have  done  in  hiring  others  to  make 
improvements,  but  of  the  improvements  that  the  fifty  men 
and  their  families  have  effected  by  their  personal  labor. 
If  they  have  not  accomplished  as  much  as  all  the  rest  of 
their  townsmen,  and  yet  own  half  the  wealth  of  the  town, 
some  wrong  to  the  majority  of  the  people  has  been  done. 
Not  that  these  men  have  not  acted  in  as  good  faith,  or 


XX  INTRODUCTION. 

with  as  upright  intentions  as  other  citizens ;  or  that  others 
would  not  be  equally  glad  to  accumulate  wealth  in  the 
same  manner ;  but  we  ask  Ti6w  it  occurs  that  the  compara- 
tively few  have  so  large  a  proportion  ?  They  have  not 
earned  it ;  for  they  could  not  have  performed  the  labor  of 
building  half  the  town,  nor  of  providing  half  its  inhabitants 
with  food  and  clothing ;  nor  could  they  have  given  half  the 
instruction  in  the  various  trades  and  in  the  school  education 
of  the  villagers.  And  if  they  have  not  done  one-half  the 
labor,  why  is  it  that  they  possess  one-half  the  property  ? 
Why  is  it,  too,  that  we  see  one  industrious  man  rise  from 
poverty  to  wealth,  because  his  business  is  prosperous,  and 
another  man  who  is  equally  diligent  in  an  equally  useful 
employment,  remaining  with  a  mere  subsistence  ? 

The  wealthy  men  of  a  nation  are  not  usually  those 
whose  genius  makes  improvements  in  the  mechanical  arts, 
or  who,  by  any  species  of  labor,  contribute  much  to  ac- 
tual production.  Their  attention  is  generally  directed  to 
the  accumulation  of  wealth  by  indirect  means,  which  do 
not  require  labor. 

[Labor  signifies  toil,  which  produces  or  distributes  some- 
thing actually  useful ;  and  this  is  the  sense  in  which  the 
term  is  used  in  this  volume.  When  toil  is  directed  to 
wrong  ends,  it  does  not  deserve  the  name  of  labor.] 

Any  internal  improvement,  for  instance,  a  railroad,  is 
usually  suggested  by  some  enterprising  man  who  desires 
to  benefit  the  public  by  opening  avenues  for  the  transpor- 
tation of  products,  and  the  conveyance  of  those  engaged 
in  selling  and  purchasing  them.  For,  although  a  vast 
amount  of  merchandise  may  be  manufactured  upon  a  few 
square  miles  of  land,  yet  agricultural  products  require  a 


INTRODUCTION.  XXI 

wide  extent  of  country.  No  ingenuity  could  make  the  six 
or  seven  square  miles  upon  which  the  city  of  New  York  is 
built,  produce  food  and  clothing  for  its  four  hundred  thou- 
sand inhabitants.  Hence  the  necessity  for  railroads  and 
means  of  transportation. 

The  projector  of  a  railroad  or  other  improvement  sel- 
dom has  much  capital  to  contribute  to  it ;  and  certainly 
one  laborer  could  do  very  little  toward  grading  the  road, 
mining  the  ore,  and  manufacturing  the  iron.  If  such  a 
road  were  deemed  necessary  for  the  public  accommoda- 
tion, it  is  doubtful  whether  it  would  be  in  the  power  of  the 
ninety-seven  and  a  half  per  cent  of  the  people  to  construct 
it,  if  the  two  and  a  half  per  cent  of  the  wealthy  men 
should  oppose  the  measure.  The  former  depend  upon 
the  latter  to  take  a  large  share  of  the  stock.  Their  will- 
ingness to  take  it  generally  depends  more  upon  the  in- 
terest that  they  will  receive  from  the  investment,  than 
upon  any  desire  to  supply  the  wants  of  their  fellow 
citizens.  If  five  thousand  of  the  most  wealthy  men 
in  the  State  of  New  York,  should  determine  that  a 
road  should  not  be  built,  it  is  doubtful  whether  the  rest  of 
the  inhabitants,  or  the  government  of  the  State  could  con- 
struct it  The  State  could  not,  unless  she  should  obtain 
the  necessary  funds  by  the  issue  and  sale  of  State  bonds. 
If  the  five  thousand  men  should  determine  to  destroy  her 
credit  by  crying  down  the  value  of  her  bonds,  and  should 
also  collect  in  their  money,  and  draw  specie  from  the 
banks,  they  would  cause  such  embarrassment  in  the  money 
market,  that  the  State  bonds  bearing  seven  per  cent  in- 
terest, could  not  be  sold,  even  at  fifty  cents  on  the  dollar,  in 
sufficient  amount  to  build  the  road.  If,  however,  the  five 


INTRODUCTION. 


thousand  men  should  think  the  road  would  yield  a  large 
per  centage  on  its  cost,  they  would,  doubtless,  call  the 
project  a  good  one,  and  take  a  large  share  of  the  stock, 
and  the  road  would  be  speedily  completed.  The  two  and 
a  half  per  cent  of  the  population  decide  whether  the  road 
shall  exist  ;  and  the  majority  of  the  people,  who  are  most 
interested,  and  the  State  government,  are  powerless  with- 
out them. 

Who  actually  make  the  road?  Capitalists  furnish 
money  to  pay  the  laborers,  and,  in  this  sense,  they  are  the 
builders  of  the  road,  as  well  as  the  owners  of  it.  But  it 
may  be  that  few,  if  any  of  them,  ever  engaged  in  the  sur- 
veying or  labor.  Laborers,  and  laborers  alone,  construct 
the  road.  Again,  who  pay  the  semi-annual  dividends  re- 
ceived by  the  stockholders  ?  If  we  allow  the  ninety-seven 
and  a  half  per  cent  of  the  population  to  own  one-half  of 
the  stock  in  the  road,  and  the  two  and  a  half  per  cent  to 
own  the  other  half,  the  latter  will  receive  as  great  an 
amount  of  dividends  every  six  months  as  the  former.  The 
tolls  and  fare  upon  the  road  are  mostly  collected  from 
those  who  transport  products  and  manufactured  articles, 
and  who  travel  upon  the  road  to  make  the  necessary  ex- 
changes. A  per  centage  must  be  taken  from  the  products, 
or  added  to  them,  to  pay  the  fare  or  tolls  ;  and  from  this 
per  centage  the  dividends  upon  the  stock  are  paid.  The 
larger  part  of  these  dividends  pass  into  the  hands  of  cap- 
italists. 

The  injustice  of  the  present  distribution  of  products  is 
still  more  conspicuous,  when  we  consider  that  present  labor 
is  indispensable  to  human  existence.  Although  all  dis- 
coveries, inventions,  and  improvements,  made  by  all  pre- 


INTRODUCTION.  XX111 

vious  labor,  are  transmitted,  free  of  expense,  to  successors, 
yet  the  property,  thus  improved  and  inherited,  cannot  give 
support  without  present  labor.  The  spontaneous  produc- 
tions of  the  earth  cannot  supply  one-twentieth  part  of  the 
population  with  food.  Clothing  can  last  but  a  few  years, 
and  buildings,  unless  repaired,  must  decay.  Therefore, 
each  generation  must  provide  its  own  means  of  sub- 
sistence. 

If  a  generation  enact  laws  through  which  one- third  of 
the  succeeding  generation  can  live  in  luxury  without  labor, 
then  the  labor  of  the  other  two-thirds,  besides  supplying 
their  own  necessities,  must  also  supply  the  wants  of  the 
first  third.  Although  the  idle  rich  man  inherits  wealth, 
yet  he  owes  his  present  support  to  the  labor  of  others. 
Others  must  raise  the  grain  that  he  consumes,  manufac- 
ture cloth  for  his  use,  build  his  house,  &c. 

If  one-third  of  a  generation  own  all  the  property,  they 
have  the  means  of  supplying  their  wants  by  labor  upon 
their  own  possessions;  but  the  two-thirds  who  have  no 
property,  have  not  even  the  means  of  preserving  their 
lives,  unless  the  one-third  allow  them  the  use  of  property 
on  winch  to  expend  their  labor.  The  rate  of  interest  on 
money  enables  the  owners  of  property  to  demand  an  un- 
due proportion  of  the  products  of  labor  for  the  use  of 
property,  and  laborers  are  compelled  to  make  their  agree- 
ments with  them  under  these  circumstances.  Undoubt- 
edly both  parties  are  governed  by  their  own  interests  in 
making  their  agreements;  but  the  circumstances  under 
which  contracts  are  made,  render  them  very  unjust  to- 
wards laborers.  Suppose  one  of  the  contracting  parties 
to  be  on  land,  and  the  other  in  water,  where  he  must 


XXIV  INTRODUCTION* 

drown,  unless  he  receive  assistance  from  the  first.  Al- 
though he  might  be  well  aware  that  his  friend  on  shore 
was  practising  a  very  grievous  extortion,  yet,  under  the 
circumstances,  he  would  be  glad  to  make  any  possible 
agreement,  to  be  rescued.  The  monetary  laws  of  nations 
have  depressed  the  producing  classes  to  a  similar  state  of 
dependence  upon  capitalists,  and  they  are  similarly 
obliged  to  make  their  contracts  with  them  under  great 
disadvantages. 

Present  laborers,  who  produce  present  products,  should 
receive  a  very  large  proportion  of  them  ;  and  capitalists, 
who  do  not  labor,  should  receive  a  correspondingly  small 
proportion.  How  shall  this  change  in  the  reward  of  labor 
and  capital  be  effected  ?  Shall  laws  be  made  to  deter- 
mine the  prices  of  various  kinds  of  labor,  and  thus  pre- 
vent the  laborer  and  employer  from  making  contracts 
upon  their  own  terms  ?  This  would  be  impracticable, 
and,  if  practicable,  not  desirable.  Each  man  should  be  at 
liberty  to  make  his  own  contracts.  There  is  no  need  of 
interference  with  this  liberty,  in  order  to  prevent  capital 
from  taking  too  large  a  proportion  of  the  products  of 
labor. 

Four  or  five  hours  of  daily  individual  toil,  judiciously 
applied,  would  probably  supply  the  wants  of  the  whole 
human  race.  Not  only  is  a  moderate  amount  of  manual 
labor  necessary  to  the  full  development  and  health  of  the 
physical  system,  but  it  contributes,  in  no  slight  degree,  to 
the  most  ennobling  exercise  of  the  moral  and  mental  capa- 
bilities. 

The  great  disparity  in  the  conditions  of  the  rich  and 
poor  is  the  natural  result  of  unjust  laws,  and,  therefore,  this 


INTRODUCTION.  XXV 

disparity  must  continue  so  long  as  these  laws  are  in  force. 
If,  however,  a  father  should  so  dispose  of  his  property, 
that  all  his  children,  except  one,  should  be  compelled  to 
work  twelve  or  fourteen  hours  a  day  for  a  mere  subsist- 
ence, while  one  son  should  receive  an  immense  fortune, 
which  would  supply  him  with  every  luxury  without  toil, 
the  injustice  and  injury  to  both  parties  would  call  forth  the 
censure  of  every  right  thinking  person.  A  government  is 
no  more  justifiable  in  legislating  so  as  to  produce  these 
effects,  than  a  father  is  justifiable  in  a  similar  treatment 
of  his  children.  Governments  are  established  to  secure 
the  rights  of  the  governed,  as  much  as  a  father  holds  his 
position,  that  he  may  secure  to  his  children  all  that  is 
necessary  to  develop  their  natures. 

Few  people  are  aware  how  greatly  their  interest  and 
happiness  are  affected  by  legislation.  In  the  United 
States,  the  people  generally  suppose,  that  they  have  all 
the  freedom  and  rights  that  a  government  can  confer,  be- 
cause they  are  at  liberty  to  select  any  location,  engage  in 
any  occupation,  and  dispose  of  their  time  and  property  in 
their  own  way.  Our  government  is  also  deemed  benefi- 
cent, because  poor-houses  and  schools  are  provided  for 
the  needy.  If  a  farmer  or  a  mechanic  should  be  told  that 
our  laws  oppressed  him,  probably  he  would  say,  that  he 
worked  at  what  he  pleased,  and  sold  either  his  labor  or  its 
products  to  whom  he  pleased,  and  had  no  law-suits,  and, 
therefore,  the  laws  did  not,  in  the  least,  infringe  his  rights, 
and  would  not  those  of  any  other  man  who  was  upright  in 
his  dealings. 

But  notwithstanding  the  apparent  freedom  secured  to 

us,  it  may  be  easily  shown  that  our  laws  inflict  great  evils 

4 


XXVI  INTRODUCTION. 

upon  us.  The  business  of  every  man,  whatever  be  his 
avocation  or  profession,  is  affected  by  them.  A  very  large 
proportion  of  the  people  are  actually  wronged  out  of  their 
property,  and  the  earnings  of  their  labor,  by  the  operation 
of  the  laws,  although  their  contracts  are  voluntarily  made, 
and  honestly  fulfilled.  Neither  of  the  contracting  parties 
may  know  that  either  is  injured  by  the  laws,  although 
both  may  be  sensible  that  justice  is  really  not  done  them. 

Many  people  seem  to  be  opposed  to  innovation.  They 
do  not  consider  that  all  improvements  in  the  mechanical 
arts,  or  in  laws,  are  innovations  upon  former  things  and 
former  laws.  The  establishment  of  our  republican  gov- 
ernment was  an  innovation  upon  monarchies.  People  do 
believe  that  changes  may  be  made  for  the  better,  for  each 
year  they  assemble  legislative  bodies  to  re-model  old  laws, 
and  to  make  new  ones.  Every  modification  of  a  law  is  an 
innovation,  and  every  new  law  is  an  innovation  upon  for- 
mer laws.  Every  moral  improvement  is  an  innovation 
up.on  the  previous  evil.  Those  who  talk  against  innova- 
tion, are  often  great  innovators.  They  are  doing,  or  ad- 
vocating something  to  improve  the  condition  of  man. 

The  necessity  for  the  exchange  of  commodities  is  gen- 
erally acknowledged.  Few,  however,  even  among  think- 
ing men,  are  aware  how  indispensable  these  exchanges 
are  to  the  subsistence  and  comfort  of  the  human  family 

Men  are  social  beings,  and  mutually  dependent.  To 
appreciate  this  important  truth,  we  must  consider  the  ina- 
bility of  each  man  to  provide  for  himself  the  numerous 
wants  of  his  nature ;  and  the  ignorance  and  discomfort 
to  which  each  would  be  exposed,  were  he  not  benefitted 
by  the  labor  of  others.  If  every  man  could  build  his  own 


INTRODUCTION.  XXV11 

house,  furnish  his  own  food  and  clothing,  and  make  all  the 
instruments  and  utensils  that  he  needs  to  use  :  if  the  ma- 
terials for  all  these  things  were  placed  upon  every  acre  of 
land,  and  every  man,  woman,  and  child,  were  endowed 
with  sufficient  skill  and  strength  to  produce  them,  there 
might  be  no  need  of  an  exchange  of  commodities. 

But  all  men  are,  in  many,  in  most  things,  dependent  on 
the  labor  of  their  fellow  men.  For  example,  take  the 
farmer,  who  is  universally  acknowledged  to  be  the  least 
dependent  of  men,  and  see  for  how  many  things  even  he 
is  indebted  to  the  labor  of  others.  He  must  have  imple- 
ments of  husbandry  for  the  cultivation  of  his  farm,  a  plow, 
harrow,  shovel,  hoe,  scythes,  sickle,  cradle,  a  fan,  or  fan- 
ning-mill,  and  a  cart  or  wagon.  The  farmer  is  dependent 
on  the  miner  for  the  iron  ore ;  on  the  collier  to  dig  the 
coal ;  on  the  furnace-worker  to  smelt  the  iron ;  and  on  the 
forger  and  the  smith  to  make  his  iron  and  steel  instru- 
ments. He  is  dependent  on  the  wagon-maker  for  his  wag- 
on; on  the  machinist  for  his  fanning-mill ;  on  the  car- 
penter for  his  house  ;  on  the  nail-maker  for  nails ;  on  the 
glass-manufacturer  for  glass ;  on  the  stone-cutter  and  the 
mason  for  mason- work ;  on  the  brick-maker  for  bricks ; 
on  the  cooper  for  barrels,  tubs,  and  pails ;  on  the  saw-ma- 
ker for  a  saw,  and  on  the  rolling-mill  to  roll  out  the  iron 
or  steel  for  it ;  on  the  tin-plate-worker  for  kitchen  uten- 
sils ;  on  the  moulder  and  caster  of  iron  for  irqn-pots ;  on 
the  miner  of  copper,  and  on  the  copper  and  brass  founder 
for  brass  and  copper-kettles ;  on  the  pump-maker  for  a 
pump,  &c.,  &c.  He  is  necessarily  dependent  on  the 
needle-maker,  the  pin-maker,  the  button-maker,  the  silk- 
grower,  the  tanner,  the  shoe-maker,  the  hatter,  the  saddle 


XXV111  INTRODUCTION. 

and  harness-maker,  the  cabinet-maker,  and  the  type-maker, 
type-setter,  and  printer.  Not  one  of  these  artisans,  in  at- 
tending to  his  particular  employment,  produces  his  food 
and  clothing ;  and  all  would  be  destitute  of  them,  unless 
supplied  with  them  by  the  labor  of  others.  The  farmer 
raises  all  his  food,  except  salt,  tea,  coffee,  sugar,  molasses, 
spices,  and  the  like ;  these,  and  the  ships  to  transport 
them,  must  be  furnished  by  others.  These  wants  call  into 
employment  ship-carpenters,  sailors,  compass-makers,  sur- 
veyors, chart-makers,  &c.  The  farmer  must  raise  wool, 
cotton,  hemp,  or  flax,  or  else  be  dependent  on  others  for 
clothing.  If  the  farmer,  who  is  the  least  dependent  of 
men,  receives  from  others  so  many  supplies,  how  is  it  with 
the  hatter  and  the  shoe-maker  ?  One  makes  an  article  to 
cover  the  head,  the  other  one  to  cover  the  feet ;  and  all 
the  other  supplies  of  both  must  be  furnished  by  the  labor 
of  others.  Artisans,  too,  depend  upon  each  other  for  the 
different  parts  of  their  work;  the  cotton  manufacturer 
must  be  assisted  by  others  to  carry  forward  his  manufac- 
ture. Many  articles,  such  as  watch-springs,  are  useless 
unless  they  are  combined  with  other  parts.  It  is,  then,  of 
paramount  importance  that  no  obstacles  be  thrown  in  the 
way  of  a  ready  exchange  of  commodities. 

A  certain  quantity  of  one  kind  of  produce  is  worth  as 
much  as  a  certain  quantity  of  another  kind  of  produce ; 
and  all  civilized  nations  have  adopted  some  medium  by 
means  of  which  all  kinds  of  produce  may  be  more  easily 
exchanged  than  by  direct  barter.  We  hear  it  sometimes 
asserted  that  there  is  no  need  of  a  medium  of  exchange. 
But  the  articles  of  trade  could  not  be  divided  and  distri- 


INTRODUCTION.  XXIX 

buted  to  supply  the  numerous  wants  of  a  people  without 
a  representative  of  value  through  which  the  distribution 
could  be  made.  For  example,  a  man  brings  to  market 
five  hundred  bushels  of  wheat.  The  purchaser  tenders 
corn  in  payment;  and  they  agree  that  seven  hundred 
and  fifty  bushels  of  corn  are  worth  as  much  as  five  hun- 
dred bushels  of  wheat.  Although  the  seller  can  use  but 
a  small  portion  of  the  corn,  he  is  obliged  to  take  the 
whole,  or  none;  but  he  soon  meets  a  purchaser,  with 
whom  he  exchanges  the  surplus  for  hams.  He  disposes 
of  the  hams  for  hats  and  shoes.  If  he  endeavor  to  divide 
the  hats  and  shoes,  and  exchange  them  for  the  articles 
that  he  needs,  he  may  spend  two  years  before  he  can  re- 
turn to  his  farm  to  raise  a  second  crop  of  wheat.  Yet  he 
is  fairly  dealt  with.  All  those  with  whom  he  exchanges, 
give  him,  as  nearly  as  possible,  an  equivalent  of  actual  val- 
ue for  the  actual  value  that  they  receive ;  and  all  the  arti- 
cles are  such  as  all  need.  In  fact,  all  trade  is  simply  a 
barter  of  one  useful  thing  for  another.  A  person  who  pro- 
duces more  of  an  article  than  he  needs  for  his  own  use, 
exchanges  his  surplus  for  the  surplus  articles  of  others. 
If  the  farmer  had  sold  the  wheat  for  money,  the  money 
would  have  been  a  tender  for  any  other  article  that  he 
wished  to  purchase. 

The  value  and  prices  of  all  products  are  estimated  by 
money,  the  legal  standard  of  value.  In  making  out  a  bill 
upon  the  sale  of  any  articles,  the  articles  are  set  down  at 
the  prices  agreed  upon,  extended  and  footed  up,  and  they 
amount  to  so  much  money.  How  could  contracts  for  vari- 
ous articles  be  made,  and  bills  of  them  be  made  out  and 
summed  up,  without  money  ?  Should  it  be  said  that  a 


XXX  INTRODUCTION. 

pint  of  Indian  corn  was  equal  to  four  rows  of  pins ;  and  a 
pound  of  cotton,  to  twenty  needles ;  and,  if  so,  must  there 
not  be  a  description  of  the  quality  of  the  pins  and  needles, 
as  well  as  that  of  the  cotton  and  corn  ?  If  it  should  be 
said  that  ten  pounds  of  sugar  were  of  equal  value  with  a 
boy's  cap,  would  it  not  be  necessary  to  describe  the  qual- 
ity of  the  sugar,  as  well  as  the  material,  workmanship,  and 
size  of  the  cap,  in  order  to  make  the  contract  just  ?  A 
standard  of  value  is  manifestly  indispensable  to  a  just  and 
convenient  exchange  of  commodities. 

The  evil  of  an  unjust  distribution  of  products  is  uni- 
versal throughout  all  civilized  nations.  The  evil  does  not 
originate  in  over  production.  A  surplus  of  cotton  does  not 
remain  because  no  one  needs  it.  Sixty  thousand  citizens 
of  New  York  receive  the  aid  of  public  charity.  All  these 
need  additional  cotton  clothing.  At  least  one-half  the 
population  of  the  whole  country  would  make  a  yearly  pur- 
chase of  five  dollars'  worth  of  additional  cotton  clothing, 
if  they  could  spare  the  means  from  their  .earnings.  In  one 
year,  ten  millions  of  persons  would  consume  $50,000,000 
worth  of  cotton  clothing,  in  addition  to  the  present  quantity. 
Cotton  would  then  maintain  a  good  price,  and  the  crops 
would  be  consumed.  If,  during  the  years  included  between 
1837  and  1844,  the  laborers  in  the  city  of  New  York  and 
its  vicinity,  whose  occupation  was  the  building  of  houses, 
had  been  furnished  with  the  work  which  they  would  have 
been  willing  to  perform,  they  would  have  built  a  house  for 
nearly  every  poor  family  in  the  city.  If  the  unemployed 
laborers  in  the  districts  where  the  materials  for  building, 
bricks,  mortar,  timber,  boards,  nails,  &c.,  are  usually  pre- 
pared, had  been  set  at  work,  the  materials  might  have 


INTRODUCTION.  XXXI 

been  furnished,  and  the  buildings  erected  and  paid  for  by 
labor.  The  laborers,  too,  would  have  been  much  happier, 
for  they  begged  for  work  without  obtaining  it,  and  many 
were  dependent  on  public  charity. 

The  unfair  distribution  of  wealth  is  not  caused  by  over- 
production, but  by  an  unjust  standard  of  distribution.  Dis- 
tribution is  regulated  and  effected  by  the  standard  of  val- 
ue, which  is  money.  Money,  as  will  be  hereafter  shown, 
exercises  astonishing  power  throughout  every  department 
of  business  and  industrial  occupation.  Unjust  distribution 
originates  in  wrong  legislation.  When  monetary  laws  shall 
be  made  equitable,  present  labor  will  naturally  receive  a 
just  proportion  of  present  products,  and  capital  will  like- 
wise receive  a  just  reward  for  its  use. 

The  laws  of  the  United  States  are  supposed  to  be  highly 
favorable  to  productive  industry ;  but  the  standard  which 
regulates  and  effects  distribution,  is  so  made,  as  in  a  great 
degree  to  defeat  its  own  object,  and  to  exert  a  disadvan- 
tageous reflex  influence  upon  production. 

Monetary  laws  are  the  most  important  that  are  enacted; 
for,  by  these  laws,  money  is  made  the  tender  for  debts, 
and  the  medium  of  exchange  for  products.  All  individu- 
als are  compelled  to  found  their  contracts  for  the  neces- 
saries of  life  upon  the  standard  fixed  by  law.  How- 
ever good  the  intentions  of  the  parties  to  contracts,  their 
contracts  will  partake  of  the  evil  of  the  monetary  laws 
upon  which  they  are  founded.  We  have  laws  to  prohibit 
the  fulfilment  of  contracts  made  upon  certain  acknowledged 
unjust  principles.  Contracts  made  in  gambling  are  void 
in  law.  In  gambling,  each  player  stakes  a  certain  sum, 
and  all  agree  that  the  winner  shall  take  the  whole.  This 


XXXii  INTRODUCTION. 

contract  would  be  perfectly  fair  or  just,  if  the  first  or  fun- 
damental principle  were  just.  But  the  principle  upon 
which  gambling  is  founded  is,  that  what  one  gains,  others 
lose;  for  no  production  is  made  by  gambling,  and  no 
equivalent  is  given  to  losers  for  their  money.  The  laws 
make  money  the  foundation  for  all  business  contracts. 
The  value  of  this  foundation  is  unjust  and  continually 
varying;  so  that  parties  in  fulfilling  their  contracts  are 
compelled  to  give  either  more  or  less  than  a  just  equiv- 
alent for  their  purchases.  The  results  of  all  contracts 
are  as  varying  and  unjust  as  their  foundation.  The  con- 
tinual fluctuations  in  the  value  of  money  make  a  sort  of 
gambling  system  of  all  trade. 

For  an  example  of  the  effects  of  variations  in  the  value 
of  money,  suppose  the  bonds  of  the  government  be  issued, 
payable  in  twenty  years,  and  bearing  six  per  cent  interest. 
If  we  had  no  foreign  market  for  these  bonds,  and  the  in- 
terest on  money  in  our  own  country  were  unalterably  fixed 
at  six  per  cent,  the  bonds  would  be  worth  exactly  par,  and 
would  continue  of  the  same  value  throughout  the  twenty 
years.  But  if  the  interest  on  money  should  rise  to  nine 
per  cent,  and  to  obtain  a  loan  at  that  rate  the  best  secu- 
rity were  required,  the  government  bonds  would  fall  below 
par,  and  would  not  be  good  security  for  more  than  three- 
fourths  of  their  par  value.  Suppose  the  government  issue 
a  bond  to  a  person  at  par,  and,  by  pressure  in  the  money 
market,  he  be  compelled  to  sell  it  at  three-fourths  of  its 
par  value,  to  meet  his  engagements,  the  government  takes, 
or  allows  others  to  take,  one-fourth  of  his  money,  for 
which  he  receives  no  equivalent,  more  than  the  gambler 
receives  an  equivalent  when  he  gambles  away  one-fourth 


INTRODUCTION.         ,  XXX111 

of  his  money.      The  government  reserves   the   right  to 
coin  money,   and  to  regulate  its  value,  and  yet  allows  its 
value  to  change  incessantly,  and  thus,  by  its  own  acts, 
deprives  a  man  of  a  fourth  of  his  money,  without  render 
ing  to  him  any  equivalent. 

Under  our  present  monetary  laws,  when  interest  is  low, 
and  money  plenty,  if  a  contract  be  made  for  the  purchase 
of  a  farm,  of  which  one-half  the  purchase  money  is  to  be 
left  on  mortgage  for  a  term  of  years,  the  purchaser  runs 
nearly  as  great  a  hazard  of  losing  a  large  proportion  of 
the  money  that  he  pays  for  the  farm,  as  if  he  had  staked 
the  amount  on  the  turning  of  dice.  For,  if  at  the  time  the 
money  becomes  due,  interest  should  be  as  high  as  it  was 
from  1837  to  1840,  it  is  doubtful  whether  the  farm  would 
sell  for  enough  to  pay  one-half  of  the  purchase  money  re- 
maining on  mortgage.  The  farmer's  loss,  in  this  case, 
would  be  owing  entirely  to  the  change  in  the  value  of  the 
dollar,  and  not  to  any  change  in  the  actual  value  of  the 
farm ;  for  the  farm  would  produce  as  good  a  crop  as  if 
money  had  continued  to  bear  a  uniform  interest  of  six  per 
cent.  The  effects  of  varying  rates  of  interest  upon  all 
classes  of  producers  will  be  hereafter  more  fully  exhibited. 

Among  political  economists,  the  nature  and  regulation 
of  money  appear  to  have  been  subjects  of  the  utmost  diffi- 
culty. Notwithstanding  many  definitions  and  explanations, 
not  one  seems  to  give  a  full  account  of  its  functions,  or  satis- 
factorily to  answer  the  numerous  and  perplexing  questions 
which  arise  concerning  its  value  and  regulation.  The  al- 
ternate abundance  and  scarcity  of  money,  and  the  varia- 
tions of  interest,  are  supposed  to  be  irremediable  evils. 
It  would  seem  that  gold  and  silver  coins  inherently  pos- 

5 


XXXIV  INTRODUCTION. 

sess  a  mysterious  power,  which  defies  all  regulation, 
and  renders  impossible  a  comprehensible  monetary  system. 
It  is  indubitably  true,  that  while  the  nature  of  a  thing  is 
not  understood,  all  attempts  to  regulate  it  must  prove  in- 
effectual. The  nature  of  money  not  being  understood, 
legislative  bodies,  have  made  it  without  a  clear  knowledge 
of  its  properties,  and  of  their  bearings  upon  one  another. 
Its  construction  has  been  necessarily  imperfect;  and  al- 
though it  may  now  be  said  to  possess  every  property  which 
belongs  to  money,  yet  the  relative  powers  of  these  pro- 
perties are  so  ill-adjusted  as  to  disturb  or  defeat  the  legit- 
imate uses  of  money. 

Governments  should  understand  the  nature  and  uses  of 
money,  and  realize  that  the  currency  of  a  nation,  instead 
of  being  a  standard  according  to  which,  and  a  power  by 
which,  a  few  capitalists  may  monopolize  the  greater  part 
of  the  earnings  of  labor,  should  be  a  standard  and  power 
which  should  distribute  products  to  producers,  according 
to  their  labor  expended  in  the  production. 

The  antiquity  of  laws  and  customs  is  not  a  proof  of 
their  excellence.  In  all  ages,  and  in  all  nations,  the  pro- 
ducing classes  have  been  ill  paid  for  their  labor.  Let  us 
no  longer  recur  to  ancient  laws  and  usages  to  uphold  our 
unjust  standard  of  distribution.  Our  producing  classes 
are  vastly  more  interested  in  knowing  how  the  products 
of  their  own  daily  labor  are  disposed  of,  than  in  knowing 
how  the  ancients  disposed  of  theirs.  We  cannot  alter  the 
evils  of  the  past ;  we  must  act  for  the  present  and  the 
future.  Suppose  a  legislature  enact  a  law  whicli  gives  a 
certain  part  of  their  constituents  great  advantages  over  the 
remainder.  They  discover  the  error,  and  amend  the  law 


INTRODUCTION.  XXXV 

so  as  to  operate  equally  upon  all.  The  alteration  is  not 
an  infringement  of  the  rights  of  those  who  received  undue 
advantages  from  the  former  law.  It  only  renders  justice 
to  those  previously  injured.  Money  is  as  much  the  repre- 
sentative of  the  property  of  the  people,  as  the  legislature 
are  the  representatives  of  their  constituents.  Its  erroneous 
construction  and  undue  power  have  made  the  tens  rich, 
and  have  plunged  thousands  into  poverty.  They  have 
sent  hundreds  to  premature  graves,  starved  the  widow 
and  the  orphan,  and  given  untold  wealth  to  the  miser. 
They  have  been  the  cause  of  incalculable  moral  and  social 
evils.  It  is  not  to  be  understood  that  those  who  now 
possess  the  wealth  are  worse  than  others  who  do  not  pos- 
sess it,  or  that  others,  if  they  could  have  obtained  it,  would 
not  have  appropriated  it  in  the  same  manner.  But  one 
thing  is  certain,  that  an  enormous  and  universal  wrong 
exists,  which  nothing  but  an  entire  change  of  our  laws, 
respecting  money,  can  remedy.  Money  is  the  national 
standard  of  distribution,  therefore,  the  evils  inevitable 
upon  its  present  institution,  are  national  evils,  which 
can  only  be  removed  by  the  action  of  the  general  gov- 
ernment. 

A  defective  standard  will,  doubtless,  appear  to  many  an 
inadequate  cause  for  the  wide- spread  wrongs  of  unjust 
distribution ;  but  the  fact  can  be  established  by  the  clear- 
est proof,  and  such  will  be  adduced  in  the  progress  of  the 
work.-  It  will  also  be  shown,  that  a  safe  and  just  mone- 
tary system  can  be  easily  established  by  the  government, 
which  will  so  regulate  the  standard,  that  the  general  dis- 
tribution of  products  will  be  in  accordance  with  actual 
earnings.  When  the  farmers  and  mechanics,  and  other 


XXXVI  INTRODUCTION. 

producers  and  laborers,  understand  the  system  which  is  to 
be  developed,  and  perceive  its  adequacy  to  secure  to  them 
a  just  compensation  for  their  labor,  they  will  as  surely 
cause  it  to  be  put  in  operation,  as  they  would  send  their 
products  to  Philadelphia  or  Boston,  rather  than  to  New 
York,  if  they  could  sell  them  there  for  a  third  more. 

The  correction  and  due  regulation  of  money  will  make 
no  change  in  the  present  ownership  of  property.  The 
changes  effected  by  the  establishment  of  a  sound  monetary 
system  will  be  gentle,  immediate,  gradual,  sure.  Only 
such  will  ensue  as  will  naturally  result  from  securing  to 
the  laborer  a  fair  compensation.  Its  object  will  be  to  pro- 
tect producers  in  their  rights,  and  not  to  retaliate  for  past 
injuries.  No  agrarian  distribution  will  be  necessary,  but 
a  just  standard,  which  will  at  once  begin  to  regulate  the 
distribution  of  products,  so  as  to  reward  the  labor  per- 
formed, and,  in  process  of  time,  will  distribute  property 
in  accordance  with  individual  and  general  rights  and  in- 
terests. Although  the  bearings  of  money  upon  labor  may 
be  deemed  a  somewhat  dry  subject,  yet,  under  its  present 
new  aspect,  it  is  believed  that  it  will  prove  deeply  interest- 
ing to  all  classes.  The  patient  and  continuous  attention 
of  the  reader  is  solicited  to  the  important  facts  and  prin- 
ciples now  to  be  presented  relative  to  the  uses  and  abuses 
of  money,  and  to  the  new  plan  to  be  suggested  for  its  in- 
stitution and  regulation. 


PART  L./:^™  ;;•;', 
THE  PRINCIPLES  OF  DISTRIBUTION. 


CHAPTER    I. 


OF   VALUE. 


VALUE  consists  in  use  ;  it  is  that  property,  or  those  prop- 
erties, which  render  anything  useful.  A  house  that  could 
not  be  occupied  would  be  worthless,  unless  its  materials 
could  be  employed  for  some  other  purpose.  A  horse  is 
valued  for  his  useful  qualities ;  if  he  become  disabled,  he 
is  worthless,  for  his  use  is  destroyed.  So  of  everything 
necessary  to  the  support  and  comfort  of  man,  it  is  valuable 
because  it  is  useful. 

The  same  is  true  of  ornaments.  They  are  valuable  be- 
cause they  are  useful  for  ornamental  purposes.  If  diamonds 
were  deprived  of  their  beauty,  their  use,  and,  therefore, 
their  value,  as  ornaments,  would  cease  to  exist.  A  valua- 
ble portrait  might  be  rendered  worthless  by  erasing  the 
features.  The  canvas  and  the  paint,  the  material  of  the 
picture  would  remain,  but  its  use  would  be  destroyed. 

The  value  of  all  property  is  estimated  by  its  usefulness. 
For  instance,  the  income  that  a  city  lot  can  be  made  to 
produce,  determines  its  value.  The  interest  on  the  money 


38 


that  its  improvement  will  cost,  must  be  first  deducted,  to- 
gether with  tii£  -.taxes,  insurance,  and  repairs  necessary  to 
keep  the  improvement  permanently  good.  The  surplus 
"it  will  yield  after  ;n&kmg  these  deductions,  determines  the 
true  value  of  the  lot. 

There  are  two  kinds  of  value :  actual  value,  and  legal 
value.  Actual  value,  or  capital,  is  anything  which  inherent- 
ly possesses  the  means  of  affording  food,  or  which  can  be 
employed  for  clothing,  shelter,  or  some  other  useful  pur- 
pose, ornamental  or  otherwise,  without  being  exchanged  for 
any  other  thing. 

Legal  value  is  anything  which  represents  actual  value,  or 
capital.  Its  existence  depends  upon  actual  value.  Its 
worth  depends  upon  its  capability  to  be  exchanged  for 
things  of  actual  value. 

The  following  illustration  shows  the  distinction  between 
actual  and  legal  value,  and  the  dependence  of  the  latter 
upon  the  former.  The  national  debt  of  England  exceeds 
£800,000,000  sterling,  say  $4,000,000,000.  It  bears  in- 
terest at  about  an  average  of  three  per  cent  per  annum, 
amounting  to  an  annual  sum  of  $120,000,000.  A  hundred 
and  twenty  millions  of  dollars'  worth  of  the  products  of 
labor,  of  actual  value,  must  be  sold  annually  to  pay  the  in- 
terest ;  to  pay  the  principal  would  require  a  large  propor- 
tion of  the  wealth  of  the  country.  If  the  paper,  the  legal 
value  which  represents  and  secures  the  debt  and  interest, 
were  collected  and  burned,  it  would  not  diminish  the  real 
wealth  of  the  nation.  It  would  merely  cause  a  change  in 
individual  ownership  of  property.  But  alter  the  circum- 
stances, and  suppose  a  similar  amount  of  actual  value  to  be 
consumed,  houses,  manufactories,  machinery,  fences,  grain, 


39 


&c.,  to  the  amount  of  $4,000,000,000,  and  nearly  every 
improvement  would  be  swept  from  the  British  Islands. 
Destroy  merely  the  three  per  cent  interest  of  actual  value 
on  the  debt  for  one  year ;  i.  e.,  products  to  the  amount  of 
$120,000,000,  and  a  famine  would  ensue;  for  actual  val- 
ue, the  products  of  labor,  would  be  destroyed,  instead  of 
a  legal  representative,  as  in  case  of  the  conflagration  of 
the  paper  securing  the  interest. 

The  power  of  money,  like  the  power  of  a  bond  and 
mortgage,  is  legal.  A  mortgage  upon  a  specific  piece  of 
land,  gives  the  owner  of  this  paper  instrument  a  right  to 
a  certain  portion  of  the  value  of  the  land.  A  mortgage  is 
a  specific  lien,  by  which  one  individual  binds  a  certain 
portion  of  his  property  to  another.  A  lien  on  property, 
in  the  technical  acceptation,  is  a  judgment  recorded  on 
the  docket  of  a  court,  or  a  mortgage  recorded  in  the 
County  Clerk's  office.  These  instruments  hold  &  right 
over  the  property  of  the  debtor,  in  defiance  of  him,  or  of 
any  other  person  who  may  have  the  property  in  posses- 
sion. Money  is  a  public  lien  upon  all  property  that  is  for 
sale  in  the  nation ;  and  the  holder  of  money  can,  at  all 
times,  procure  with  it  the  amount  of  property  which  it 
represents,  as  much  as  the  holder  of  a  mortgage  can  pro- 
cure the  specified  amount  of  property  upon  which  the 
mortgage  is  a  lien.  Money  is,  however,  a  lien  superior  to 
all  mortgages  and  judgments ;  because,  if  the  specified 
amount  of  money  be  tendered,  the  owner  of  the  mortgage, 
or  judgment,  is  compelled  to  cancel  it. 

Notes  of  hand  are  deemed  by  all  business  men  to  be 
liens  upon  the  property  of  their  drawers ;  otherwise,  al- 
though a  man  owned  ten  thousand  dollars'  worth  of  prop- 


40 


erty,  his  note  for  five  thousand  dollars  would  be  deemed 
no  better  secured  than  if  he  owned  no  property.  If  money 
were  not  a  lien  on  property,  it  would  be  valueless,  and 
people  would  cease  to  part  with  their  property  for  it. 

The  value  of  notes  of  hand,  bonds  and  mortgages,  book 
accounts,  and  money,  depends  upon  their  capability  of  be- 
ing exchanged  for  property.  Their  power  to  accumulate 
is  given  by  law,  and  they  accumulate  a  mere  legal  repre- 
sentative ;  that  is,  interest  in  money,  which  is  valuable 
only  because,  like  the  principal,  it  can  be  exchanged  for  a 
certain  amount  of  actual  value.  Hence,  the  value  is  in  the 
property,  and  not  in  the  money  or  in  the  obligation.  Money, 
and  all  obligations,  are  mere  representatives,  and  depend 
upon  property  for  their  value. 


CHAPTER    II. 
MONEY— THE   MEDIUM   OF   DISTRIBUTION 


SECTION  I. 
THE  NATURE  AND  PROPERTIES  OF  MONEY. 

MONEY  is  the  national  medium  of  exchange  for  property 
and  products.  It  must  be  instituted,  and  its  value  must 
be  fixed  by  the  laws  of  the  nation,  in  order  to  make  it  a 
public  tender  in  payment  of  debts.  No  debt  can  be  paid 
with  property  or  with  individual  notes,  except  by  consent 
of  the  creditor ;  but  when  money  is  tendered,  all  creditors 
are  compelled  to  receive  it  in  full  satisfaction  for  debts. 
The  aim  of  legislation  in  regulating  the  value  of  money, 
is  to  insure  to  all  individuals,  in  making  exchanges  of  their 
property  for  money,  the  full  value  of  their  products  or 
property.  Debts  are  postponements  of  the  time  of  pay- 
ment for  the  property  or  products  received ;  and  loans  of 
money,  and  all  rentals  of  property,  are  mere  rentals  of  the 
use  of  certain  amounts  of  legal  or  actual  value,  which  use 
is  to  be  paid  for  at  the  expiration  of  a  specified  period. 
Money  is  the  legal  tender,  and  must  be  offered  and  re- 
ceived in  payment  for  all  these  debts. 

Certain  properties  are  by  law  given  to  some  kind  of 
substance,  which  bears  the  name,  and  performs  the  func- 


tions  of  money.  The  term  money,  then,  signifies  a  legal 
and  public  medium  of  exchange,  which  possesses  all  the 
qualifications  necessary  to  effect  a  just  exchange  of  prop- 
erty. In  the  discussion  of  the  nature  of  money,  it  will 
appear  that  its  properties  are,  in  truth,  the  creation  of 
law,  and  entirely  different  from  the  properties  of  the  things 
which  it  exchanges. 

Money  has  four  properties  or  powers,  viz  :  power  to  rep- 
resent value,  power  to  measure  value,  power  to  accumulate 
value  by  interest,  and  power  to  exchange  value.  These  prop- 
erties are  co-essential  to  a  medium  of  exchange ;  it  is  im- 
possible that  any  one  of  them  should  exist  in  such  a  me- 
dium independently  of  the  others.  The  material  of  money 
is  a  legalized  agent,  employed  to  express  these  powers, 
and  render  them  available  in  trade.  The  powers  of  money, 
which  alone  render  it  useful,  are  created  by  legislation ; 
therefore,  money  can  possess  none  but  legal  value.  As 
all  legal  value  depends  upon  the  actual  value  which  it  holds 
or  represents,  money  must  represent  actual  value — that  is, 
the  value  of  property  or  labor. 


SECTION  II. 

THE  POWER  OF  MONEY  TO  REPRESENT  VALUE. 

i » 

Nothing  can  be  money  but  a  legal  representative  of  prop- 
erty ;  for  it  is  impossible  to  find  any  light  and  portable 
material  possessing  the  requisite  inherent  value  to  equal 
and  balance  the  value  of  the  property  and  products  to  be 


43 


exchanged.  The  real  value  is  in  the  products,  and  the 
money  is  only  the  legal  medium  by  which  this  value  is 
represented  and  exchanges  of  the  products  are  made. 

Every  representative  is  distinct  from  the  thing  which  it 
represents ;  and  its  presence  implies  the  absence  of  the 
thing  represented.  A  representative  has  power  to  act  for, 
or  in  lieu  of  something  else.  The  power  to  represent  is 
always  independent  of  the  natural  or  inherent  powers  of 
the  representative ;  it  is  superadded  and  delegated,  and  can- 
not alter  the  original  capabilities  and  qualities  of  the  agent. 
Delegated  authority  gives  the  agent,  the  person  or  thing, 
power  over  other  persons  or  things,  which,  with  merely 
his  natural  capabilities,  he  can  not  possess.  Acting  for 
himself  alone,  his  acts  are  all  individual,  and  incapable  of 
binding  any  but  himself.  For  instance,  he  cannot  give  a 
note,  bond  or  deed,  which  will  bind  others,  or  the  property 
of  others,  unless  the  power  be  expressly  delegated  to  him. 
He  may  receive  authority  to  give  a  note  or  bond  binding  the 
property  of  the  people  for  its  payment.  This  authority 
does  not  diminish  or  alter  his  capabilities  as  an  individual ; 
it  is  superadded  to  his  natural  endowments.  An  ambassa- 
dor represents  our  nation  at  a  foreign  court.  If  he  be  lost 
at  sea,  the  nation  loses  but  one  individual,  although  he 
represents  and  acts  for  twenty  millions.  But  if  the  nation 
should  be  annihilated,  and  the  ambassador  should  reach  his 
destination  in  safety,  he  would  cease  to  be  a  representa- 
tive— he  would  have  nothing  to  represent.  He  would,  how- 
ever, possess  all  his  powers  as  an  individual — he  would  loso 
only  his  delegated  authority  as  a  representative. 

A  representative  in  Congress  is  chosen  by  the  people. 


44 


and  is  empowered  to  act  for  or  in  lieu  of  them.  Still,  it  is 
not  supposable  that  he  possesses  as  much  knowledge  and 
skill  as  all  his  constituents.  They  are  farmers,  mechan- 
ics, manufacturers,  and  merchants.  Of  many  of  the  arts 
with  which  they  are  familiar,  the  member  of  Congress  is 
ignorant.  He  is  their  representative  for  one  specific  pur- 
pose— i.  e.,  to  make  laws  to  govern  the  people.  He  has  a 
moral  perception  of  justice  corresponding  to  their  percep- 
tions of  justice,  and  this  fits  him  to  be  their  repre- 
sentative in  making  laws.  Money  is  made  solely  to  facili- 
tate the  exchange  of  products.  To  be  capable  of  effecting 
this  exchange,  it  must  be  endowed  with  a  legal  power  to 
represent  actual  value  ;  for  it  possesses  no  inherent  quality 
which  makes  it  equivalent  to  products,  or  labor,  more  than 
the  representative  in  Congress  possesses  all  the  know- 
ledge and  abilities  of  his  constituents.  It  is  held  for  the  time 
being  in  lieu  of  property ;  we  cannot  use  it  as  property, 
and  if  we  wish  to  use  actual  property  we  must  obtain  it 
by  giving  the  legal  representative,  money,  in  exchange  for 
it.  The  representative  of  value  should  no  more  have 
power  to  accumulate  property  in  the  hands  of  a  few,  than 
the  representative  of  the  people  should  be  allowed  to  le- 
gislate for  the  benefit  of  a  few  of  his  constituents.  Both  are 
mere  representatives,  endowed  with  powers  for  specific 
purposes ;  the  former  to  exchange  products,  the  latter  to 
enact  laws.  The  producing  classes  elect  and  support  the 
members  of  Congress,  who  are  bound  to  make  laws  for 
the  equal  benefit  of  the  people.  The  people  also  furnish  the 
material  of  money,  and  the  property  which  it  represents  ; 
and  the  constitution  of  the  representative  of  value  should 
be  such  as  to  conduce  in  the  highest  degree  to  their  welfare. 


45 


The  following  is  another  example  of  delegated  or  rep- 
resentative power :  A  man  gives  a  note  for  a  thousand 
dollars.  He  thus  delegates  to  the  paper  on  which  the 
note  is  drawn  a  power  that  increases  its  legal  value  mill- 
ions of  times.  Before  the  drawing  of  the  note,  the  paper 
possessed  a  small  amount  of  actual  value,  but  was  not  a 
legal,  representative  of  other  property ;  for,  as  paper  only, 
its  worth  depended  upon  its  inherent  qualities.  But  when 
the  note  has  been  drawn  upon  the  paper,  the  paper  has 
become  a  representative,  and  has,  according  to  law,  a 
delegated  control  of  a  thousand  dollars'  worth  of  the 
property  of  the  drawer.  The  drawing  of  the  note  does 
not  add  a  fraction  to  the  actual  worth  of  the  paper ;  its 
value  in  holding  the  property  is  legal,  and  superadded 
to  its  inherent  qualities  ;  the  same  value  might  be  super- 
added  by  law  to  a  plate  of  steel,  or  of  any  metal.  The  note 
and  the  property  are  distinct  existences ;  but  the  legal  value 
of  the  note  depends  on  the  actual  value  of  the  property. 
The  paper  material  of  a  note  good  for  a  thousand  dollars, 
is  not  as  valuable  as  an  ounce  of  flour ;  but  it  has  a  legal 
power  which*  makes  it  capable  of  being  exchanged  for  two 
hundred  barrels  of  flour,  worth  five  dollars  each.  A  tri- 
fling labor  will  provide  the  representative  note,  but  a  great 
amount  of  labor  is  required  to  produce  such  a  quantity  of 
flour,  or  actual  wealth.  All  individual  notes  are,  however, 
payable  not  in  flour,  nor  in  actual  products  or  property, 
but  in  money,  the  legal  representative  of  all  commodities 
and  property. 

According  to  law,  the  owner  of  an  estate  represents  the 
value  of  the  estate  in  his  own  person ;  but  by  a  simple 
power  of  attorney,  he  can  give  to  another  the  entire  con 


46 

trol  of  his  property  during  his  life  time.  The  receiver  of 
the  power  may  not  be  worth  a  dollar,  but  the  power  of 
attorney  may  make  him  the  representative  and  controller 
of  millions  of  dollars'  worth  of  property.  The  paper  that 
secures  to  him  the  control  of  the  property,  has  no  greater 
inherent  value  after  the  writing  of  the  instrument,  than  it 
had  before  ;  it  is  merely  made  to  represent  the  property 
and  control  its  use.  The  actual  value  which  the  paper 
represents,  exists  in  the  property,  and,  without  the  prop- 
erty, the  paper  would  be  worthless.  The  power  of  attor- 
ney is  confined  to  an  individual ;  but  if  a  man,  instead  of 
making  the  power  to  a  single  person,  should  make  it  to 
bearer,  whoever  held  the  paper  would  have  power  over 
the  property  controlled  by  it.  The  negotiable  power  of 
money  is  inseparable  from  it,  otherwise  it  would  not  be 
money.  The  holder  of  money  has  power  over  a  certain 
amount  of  property  for  sale,  and  can  appropriate  it  to 
himself.  Money  has  a  legal  power  or  value  as  much  su- 
perior to  the  natural  value  of  its  material,  as  a  paper 
which  secures  authority  over  property  has  a  value  superior 
to  blank  paper. 

Money  is,  then,  a  legal  existence,  being  constituted  a 
national  representative  of  property ;  consequently  it  is  a 
public  lien  on  all  property  for  sale  in  the  nation,  a  public 
medium  for  the  exchange  of  products,  and  a  tender  in  pay- 
ment of  debts. 

A  farmer  has  five  hundred  bushels  of  wheat,  with  which 
he  wishes  to  buy  provisions  and  clothing.  He  will  not  sell 
the  wheat  for  five  hundred  dollars,  unless  money  be  a  legal 
equivalent  for  all  the  articles  that  he  wishes  to  purchase. 
He  does  not  want  money  to  keep ;  he  wants  it  to  exchange 


47 


for  articles  to  use  or  consume.  He  sells  his  produce  for 
money,  because  money  is  a  legal  equivalent  for  every  spe- 
cies of  property. 

If  money  be  made  a  representative  of  the  earth  and  its 
productions,  it  cannot  fail  to  be  permanently  valuable,  for 
the  earth  and  its  products  are  necessary  to  the  existence 
of  man  ;  and  anything  which  legally  represents  them,  and 
can  be  exchanged  for  them,  must  be  valuable  to  its 
holders. 

It  is  a  popular  error  that  the  value  of  money  depends 
upon  the  material  of  which  it  is  made.  As  this  miscon- 
ception of  the  nature  of  money  is  of  long  standing,  I  shall 
endeavor  to  point  out  its  inconsistency,  in  connection  with 
each  property  of  money.  The  value  of  money  perpetually 
depends  upon  its  power  to  represent  value,  and  not  upon 
its  material,  because  money  never  reaches  a  point  at 
which  it  can  be  used  as  an  article  of  actual  value.  The 
value  of  lands  and  of  goods,  wares  and  merchandise,  does 
not  depend  upon  any  act  of  legislation,  upon  any  power  to 
represent  and  exchange,  but  upon  their  utility  for  food, 
clothing,  &c.  If  the  gold  or  silver  material  of  money  be 
used  for  any  other  purposes  than  to  represent  and  ex- 
change property,  if  it  be  used  for  spoons,  or  ornaments,  it 
at  once  ceases  to  be  money :  it  is  no  longer  a  legal  repre- 
sentative of  value,  but  finds  its  level  as  a  commodity.  But 
the  inherent  properties  of  all  articles  of  actual  value,  are 
their  only  valuable  properties.  However  various  the  em- 
ployment of  articles  of  actual  value,  their  properties  do 
not  change,  or  become  useless.  For  example,  cloth  is 
useful  to  make  a  garment,  and  when  made,  is  a  cloth  gar- 
ment. The  nature  of  the  cloth  does  not  change ;  it  is  only 


48 

applied  to  a  specific  purpose,  and  the  cloth  retains  its 
properties  of  durability,  &c.  Metal  buttons  are  used  upon 
the  garment,  and  continue  to  be  metal  buttons.  But  silver 
money  converted  into  a  spoon,  makes  a  silver  spoon,  and 
not  a  money  spoon.  The  silver  is  no  longer  a  legal  repre- 
sentative of  actual  value ;  it  is  no  longer  money,  for  it  has 
ceased  to  have  the  properties  of  money,  which  are  crea- 
tions of  law.  Neither  a  spoon  nor  bullion  can  legally 
represent,  measure,  accumulate  nor  exchange  property; 
and  the  mere  metal  is,  consequently,  not  a  medium  of  ex- 
change, nor  a  tender  in  payment  of  debts. 

That  the  worth  of  money  to  exchange  property  does 
not  reside  in  its  material,  but  in  its  power  to  represent 
value,  will  appear  by  the  following  illustration.  A  person 
intends  to  purchase  a  farm  and  settle  in  Ohio.  He  has  a 
thousand  dollars  in  silver,  but,  as  it  is  inconvenient  to 
transport  the  specie,  he  exchanges  it  at  a  bank,  in  New 
York,  for  a  thousand  one  dollar  bank  bills.  The  bills 
readily  purchase  the  farm.  The  individual  who  receives 
them  in  payment,  lends  them  on  interest,  and  the  bor- 
rower purchases  wheat  with  them.  Thus  the  bills  circu- 
late as  money,  and  can  be  loaned  for  as  good  an  income, 
or  will  purchase  as  much  grain,  as  a  thousand  dollars  in 
silver.  They  fulfil  every  purpose  for  which  money  is  de- 
signed, as  well  as  the  silver  would.  If  the  notes  should 
remain  permanently  in  Ohio,  and  the  people  should  believe 
the  bank  secure,  the  notes  would  be  a  much  better  cur- 
rency than  coins,  for  they  would  make  purchases  as  well, 
they  could  as  well  be  loaned  for  an  income,  and  could  be 
much  more  easily  transported.  Why  could  not  a  thou- 
sand axes  be  deposited  in  Wall  street,  and  a  thousand 


49 


pieces  of  paper  be  taken  for  them,  on  each  corner  of 
which  was  engraved  "  one  axe?  and  in  the  body  a  written 
promise  to  pay  one  axe  on  demand,  and  these  paper  axes 
be  taken  to  Ohio,  and  made  to  answer  every  purpose  for 
which  axes  are  designed,  in  clearing  forests,  &c.,  in  lieu 
of  the  steel  axes  ?  There  is  as  much  resemblance  between 
a  paper  axe  and  a  steel  axe,  as  there  is  between  a  paper 
dollar  and  a  silver  dollar.  If  a  paper  dollar,  that  repre- 
sents a  silver  dollar,  is  as  good  for  all  the  purposes  for 
which  money  is  designed,  as  a  silver  dollar,  why  is  not  a 
paper  axe,  that  represents  a  steel  axe,  as  good  for  all  the 
purposes  for  which  axes  are  designed,  as  the  steel  axe  ? 
The  reason  that  the  paper  dollar  will  answer  as  well  as 
the  silver  dollar,  is,  that  the  silver  and  the  paper  dollar  are 
both  representatives,  the  silver  dollar  equally  with  the 
paper  dollar. 

The  government  has  made  gold  and  silver  coins  repre- 
sentatives of  all  value,  and  the  public  tender  in  payment 
of  debts.  And  it  has  likewise  granted  to  individuals,  or 
corporations,  the  privilege  to  make  bank-notes  represen- 
tatives of  coins.  Coins  are  representatives  of  value,  and 
bank-notes  are  representatives  of  representatives.  If  the 
government,  by  enacting  laws,  could  make  money  possess 
actual  instead  of  representative  value,  and  make  the  ac- 
cruing interest  on  the  loan  of  money  an  actual  producer 
of  wealth  instead  of  a  power  to  compel  borrowers  to  pro- 
duce by  their  labor  what  lenders  gain  by  interest,  the  con- 
clusion would  be  irresistible  that  law  can  change  the  na- 
ture of  substances,  and  make  gold  and  silver  possess 
great  intrinsic  value.  When  legislation  can  effect  this,  no 
doubt  can  be  entertained  of  its  ability  to  make  paper- 

7 


50 


money  perform  the  same  labor  and  production,  or  a  paper- 
axe  perform  the  functions  of  a  steel  one.  But  unless  law 
can  change  the  nature  of  substances,  money  as  such  can 
have  only  legal  and  representative  value ;  for  as  soon  as 
the  material,  whether  gold,  silver,  or  paper,  assumes  an- 
other form,  or  is  used  for  any  other  purpose,  it  ceases  to 
be  money,  and  cannot  legally  represent,  measure,  accu- 
mulate, nor  exchange  value.  The  sole  value  of  gold  and 
silver  coins,  when  not  used  for  a  currency,  consists  in 
their  worth  for  spoons,  ornaments,  &c.,  which  are  a  very 
small  part  of  our  actual  wealth,  and  are  not  indispensable 
to  human  existence. 

The  reason  that  the  value  of  bullion  is  equal  to  that  of 
coins  is,  that  coins  are  made  at  the  expense  of  the  nation. 
The  government  coins  all  the  gold  and  silver  offered  at 
the  mint  free  of  charge.  It  will  give,  in  exchange  for  bul- 
lion, an  equal  weight  in  coins.  If  the  government  would 
take  wool,  make  cloth  at  the  public  expense,  and  return  to 
those  who  furnished  wool  an  equal  weight  in  cloth,  the 
cloth  and  wool  would  command  the  same  price,  because 
the  expense  of  manufacturing  the  cloth  would  be  borne  by 
the  government.  If  a  charge  were  made  for  manufactur- 
ing, the  wool  would  be  worth  less  than  the  cloth ;  and  if 
a  premium  wrere  charged  for  coinage,  the  value  of  bullion 
would  depreciate  below  that  of  coins.  Therefore,  gold 
and  silver  have  no  special  inherent  value  which  makes 
them  naturally  money ;  for  they  are  not  money  until  made 
so  by  conversion  into  coin. 


51 


SECTION  III. 

THE    POWER   OF    MONEY    TO    MEASURE    VALUE. 

The  power  to  measure  value  is  another  property  of  money. 
Measures  are  definite  quantities  of  length,  weight,  bulk, 
and  value,  by  which  the  amount  of  length,  weight,  bulk, 
and  value  in  any  substance  is  defined  and  ascertained. 

Length,  weight,  bulk,  and  value,  must  necessarily  be 
indefinite,  unless  some  limit  be  fixed  upon  for  a  standard 
to  which  all  other  lengths,  weights,  quantities  and  values 
may  be  referred,  and  by  which  they  may  be  computed. 
Length  may  be  the  circumference  of  the  earth,  or  the  un- 
known distance  to  a  star,  or  it  may  be  the  one-thousandth 
part  of  an  inch ;  therefore,  to  convey  any  definite  idea  of 
length,  reference  must  be  made  to  a  fixed  standard. 
Weight,  quantity,  and  value,  are  equally  indefinite ;  hence 
the  necessity  for  some  limit  or  standard,  to  which  they 
may  be  referred,  and  by  which  their  amount  may  be  as- 
certained. • 

The  length,  weight,  quantity,  and  value  of  all  articles, 
in  business  transactions,  are  settled  by  certain  measures 
fixed  upon  by  the  government.  The  length  of  the  yard- 
stick measures  and  determines  a  before  undefined  length 
of  cloth ;  the  size  of  the  bushel  measures  and  defines  the 
before  undefined  quantity  of  grain ;  and  so  of  the  pound 
weight,  it  defines  the  quantity  of  cotton  or  other  sub- 
stances. The  cloth  does  not  define  the  length  of  the 
yard-stick,  neither  does  the  grain  determine  the  size  of  the 


52 


bushel,  nor  the  cotton  the  pound  weight.  The  value  of 
the  dollar  measures  and  determines  a  before  undefined 
value  of  land,  labor,  or  products ;  the  value  of  land,  labor, 
and  products,  does  not  measure  and  determine  the  already 
defined  value  of  the  dollar.  When  the  yard-stick  meas- 
ures cloth,  it  does  not  determine  its  own  length ;  and  when 
money  exchanges  property,  it  does  not  determine  its  own 
value.  Both  the  length  of  the  yard-stick,  and  the  value 
of  the  money,  were  previously  determined  by  the  laws 
which  instituted  them,  and  gave  them  power  to  measure 
length  and  value,  which  are  their  sole  objects  and  uses  as 
measures. 

The  pound  weight,  or  the  standard  of  weights,  deter- 
mines the  amount  of  the  weight  of  all  commodities ;  and 
the  dollar,  or  money,  the  standard  of  value,  by  its  own 
fixed  legal  value,  determines  the  amount  of  the  value  of  all 
other  things.  The  weight  of  the  pound,  the  length  of  the 
yard,  and  the  value  of  the  dollar,  are  presumed  to  be  in- 
variably fixed  by  national  laws,  and,  therefore,  every  varia- 
tion from  their  legal  standard  is  a  fraud  upon  the  public. 
If  the  yard  be  variable,  the  measure  of  length  will  com- 
mit frauds  when  it  is  used ;  and  if  its  value  be  fluctuating, 
the  measure  of  value  will  commit  frauds  whenever  it  is 
used  to  measure  the  value  of  labor  or  property.  If 
measures  be  strictly  uniform,  they  will  equitably  deter- 
mine quantities  and  values,  whether  of  land,  labor,  or 

commodities. 
i 

Money  measures  its  own  amount  or  value  of  actual 
property  as  often  as  it  is  passed  from  one  individual  to  an- 
other, as  the  yard-stick  measures  its  own  length  as  often 


53 


as  it  is  passed  over  the  cloth ;  consequently,  a  given  sum 
of  money  measures1  in  a  given  time  more  or  less  property, 
according  to  the  frequency  of  its  transfer.  In  one  morn- 
ing, a  dollar,  passing  through  several  hands,  may  be  laid 
out  for  food,  buy  various  articles  of  clothing,  be  loaned 
out  with  other  dollars  on  bond  and  mortgage,  and  then 
purchase  a  dozen  articles  more.  Every  time  it  passes,  it 
determines  the  market  value  of  the  thing  that  it  buys. 

If  there  were  no  distinction  between  measures  of  value 
and  articles  of  value,  the  same  principle  would  apply  to 
both :  one  yard  of  cloth,  rapidly  measured,  would  answer 
the  purpose  of  two,  slowly  measured ;  a  pound  of  food, 
rapidly  weighed,  would  answer  the  purpose  of  two,  slowly 
weighed.  The  value  of  money  cannot  consist  in  the 
amount  or  kind  of  the  metal  in  which  its  properties 
are  embodied ;  for,  in  its  rapid  circulation,  it  can  be  used 
neither  as  a  utensil  nor  as  an  ornament,  and  is  only  use- 
ful to  exchange  property.  Eagles  and  dollars  are  seldom 
used  for  ornamental  purposes ;  and  even  if  so  used,  while 
thus  employed,  are  useless  to  exchange  or  measure  pro- 
ducts. 

The  value  of  money  balances  the  value  of  the  commod- 
ity sold,  as  the  weight  of  the  pound  balances  the  weight 
of  the  thing  weighed ;  or  the  yard,  the  length  of  the  cloth 
measured.  Measures  of  quantity  remain  stationary,  their 
only  function  being  to  determine  the  exact  quantities  of 
the  commodities  transferred  from  the  seller  to  the  pur- 
chaser. But  the  measure  of  value  passes  into  the  posses- 
sion of  the  seller,  who  holds  it  as  a  representative  of  value, 
in  lieu  of  his  commodity.  And  it  is  on  this  account  that  the 


54 


measure  of  value  is  frequently  confounded  with  articles  of 
value. 

Money,  like  all  other  measures,  is  divisible.  The  yard 
is  divided  into  feet  and  inches,  that  it  may  determine  any 
required  length.  The  pound  weight  is  divided  into 
half-pounds,  and  ounces ;  the  bushel  into  the  peck,  quart, 
&c.,  that  they  may  accurately  determine  the  various 
weights,  and  quantities  of  various  substances.  Money  is 
divided  into  pounds,  shillings,  and  pence,  dollars,  half-dol- 
lars, dimes,  &c,,  that  it  may  determine  the  precise  amount 
of  the  value  of  all  commodities. 

The  government  reserves  the  right  to  fix  the  length 
of  the  yard,  the  weight  of  the  pound,  the  size  of  the  bushel, 
and  the  value  of  the  dollar,  that  they  may  be  fitted  for  pub- 
lic use.  Money  is  the  public  measure  of  value ;  and  the 
government  is  bound  to  make  it  just  and  uniform,  that  it 
may  correctly  determine  the  value  of  all  commodities. 


SECTION  IV. 

THE    POWER   OF   MONEY   TO   ACCUMULATE    VALUE 
BY   INTEREST. 

Money,  the  representative  and  measure  of  value,  has 
also  the  power  to  accumulate  value  by  interest.  This  accu- 
mulative power  is  essential  to  the  existence  of  money,  for 
no  one  will  exchange  productive  property  for  money  that 
does  not  represent  production.  The  laws  making  gold  and 
silver  coins  a  public  tender,  impart  to  dead  masses  of  metal, 
as  it  were,  life  and  animation.  They  give  them  certain 


powers,  which,  without  legal  enactment,  they  could  not 
possess,  and  which  enable  their  owner  to  obtain  for  their 
use  what  other  men  must  earn  by  their  labor.  One  piece 
of  gold  receives  a  legal  capability  to  earn  for  its  ownW, 
in  a  given  time,  another  piece  of  gold  as  large  as  itself. 
Or,  in  other  words,  the  legal  power  of  money  to  accumu- 
late by  interest,  compels  the  borrower,  in  a  given  period, 
according  to  the  rate  of  interest,  to  mine  and  coin,  or  pro- 
cure by  the  sale  of  his  labor  or  products,  another  lump  of 
gold  as  large  as  the  first,  and  give  it,  together  with  the 
first,  to  the  lender. 

If  the  borrower  of  the  gold  pay  interest  half  yearly  at 
the  rate  of  seven  per  cent  per  annum,  he  must  double  the 
lump  in  about  ten  years.  If  he  pay  interest  half  yearly  at 
the  rate  of  six  per  cent  per  annum,  he  must  double  the 
lump  in  less  than  twelve  years ;  at  three  per  cent,  in  less 
than  twenty-four  years;  and  at  one  per  cent,  in  about 
seventy  years. 

In  popular  phrase,  money  is  said  to  be  a  producer  of 
value  ;  but  this  expression  conveys  a  false  idea,  for  money 
possesses  no  power  to  produce.  The  earth  produces  by 
actual  increase — by  the  growth  of  additional  quantities 
of  the  seed  sown.  But  money  possesses  no  natural  capa- 
bility to  produce  its  like.  It  can  only  accumulate  things 
already  produced.  When  a  loan  of  a  hundred  dollars  is 
repaid  with  interest,  the  six  or  seven  dollars  given  as 
interest  have  not  grown  upon  the  original  one  hundred. 
Nothing  grows  upon  the  mortgage  that  bears  interest. 
The  interest  on  the  money,  or  on  the  mortgage,  must  be 
paid  in  money  received  in  exchange  for  property,  products, 
or  labor. 


56 


The  worth  and  amount  of  the  interest  on  the  dollar 
constitute  and  determine  the  value  of  the  dollar,  and  make 
it  equal  to  a  certain  amount  of  actual  value  or  property,  as 
much  as  the  amount  and  kind  of  labor  that  a  man  can  per- 
form, determine  his  value  as  a  workman ;  or  as  the  quality 
and  quantity  of  the  fruit  of  a  tree  determine  the  value  of  the 
tree.  In  the  same  manner,  and  for  the  same  reason,  if  the 
interest  on  the  dollar  be  good,  the  dollar  will  also  be  good. 
The  value  of  the  workman  and  of  the  tree  is  natural  to 
them,  and  consists  in  their  power  to  produce ;  the  value 
of  money  is  artificial,  and  consists  in  its  arbitrary  power 
to  exchange  products  and  property,  and  accumulate  them 
when  it  is  loaned. 

Demand  and  supply  are  sometimes  said  to  give  value  to 
money ;  but  it  would  be  as  reasonable  to  assert  that  de- 
mand and  supply  fix  the  length  of  the  yard,  the  weight  of 
the  pound,  or  the  size  of  the  bushel,  as  that  demand  and 
supply  regulate  the  value  of  money.  One  is  a  legal  instru- 
ment to  determine  value,  its  own  value  being  fixed  by  law ; 
the  others  are  legal  instruments  to  determine  length,  weight, 
and  quantity,  their  own  length,  weight,  and  size  being  fixed 
by  law. 

Money  is  valuable  in  proportion  to  its  power  to  accumu- 
late value  by  interest.  A  dollar  which  can  be  loaned  for 
twelve  per  cent  interest,  is  worth  twice  as  much  as  one 
that  can  be  loaned  for  but  six  per  cent,  as  much  as  a  rail- 
road stock  which  will  annually  bring  in  twelve  per  cent,  is 
worth  twice  as  much  as  one  that  annually  brings  in  six  per 
cent.  The  value  of  State,  bank,  railroad,  or  any  other 
stock,  is  estimated  by  the  dividends  it  will  pay  during  the 
time  it  has  to  run.  Any  increase  or  diminution  of  the 


57 


power  of  money  to  accumulate  by  interest,  increases  or 
diminishes  proportionably  its  value,  and  consequently  its 
power  over  property. 

Money  becomes  worthless  whenever  it  ceases  to  be  ca- 
pable of  accumulating  an  income  which  can  be  exchanged 
for  articles  of  actual  value.  Take  the  following  example. 
Suppose,  during  the  revolutionary  war,  A.  had  lent  to  B.  a 
thousand  dollars  in  gold  or  silver  coin,  at  six  per  cent  in- 
terest, for  a  term  of  fifty  years,  and  had  taken  as  security 
a  mortgage  on  B.'s  farm,  which  was  worth  $10,000.  A. 
had  agreed  to  receive  the  six  per  cent  interest  from  B.  in 
Continental  money.  This  currency  soon  after  proved  to 
be  worthless ;  and  the  interest  proving  worthless,  the  prin- 
cipal would  have  been  worthless  to  A.  during  the  fifty 
years  for  which  he  loaned  it,  although  the  loan  was  made 
in  gold  and  silver  coin,  and,  at  the  expiration  of  that  pe- 
riod, the  principal  would  have  been  paid  him  in  coin. 

Now  reverse  the  circumstances,  and  suppose  A.  had 
loaned  to  B.  a  thousand  dollars  in  Continental  money  on 
the  same  farm  for  fifty  years,  and  had  made  the  interest 
payable  in  gold  and  silver  coin.  Although  the  principal 
of  the  mortgage  was  loaned  in  Continental  money,  which 
soon  after  became  worthless,  it  would  have  continued  as 
valuable  to  A.  for  fifty  years,  as  the  interest  in  coin  which 
he  received  upon  it.  The  interest  continuing  valuable, 
the  contract  would  have  been  a  binding  lien  upon  B.'s  farm 
for  the  fifty  years,  and  would  have  taken  a  part  of  the 
yearly  produce  of  the  farm  for  that  period.  At  the  ex- 
piration of  the  fifty  years,  the  principal  would  have  be- 
come worthless,  for  it  could  not  have  brought  in  a  further 
income.  But  in  the  former  case,  in  which  specie  was 

8 


58 

loaned,  and  the  interest,  made  payable  in  Continental 
money,  the  interest  being  worthless,  the  contract  would 
not  have  been  an  encumbrance  upon  B's.  farm ;  for  no 
part  of  its  yearly  products  would  have  been  required  to 
pay  the  interest.  At  the  expiration  of  fifty  years,  the  prin- 
cipal could  have  been  demanded  in  specie. 

The  value  of  money  as  much  depends  upon  its  legal 
power  to  be  loaned  for  an  income,  as  the  value  of  a  farm 
depends  upon  its  natural  power  to  produce.  If  the 
Continental  money,  or  the  assignats  of  France,  had  been 
made  representatives  of  property,  and  capable  of  being 
always  loaned  for  a  good  and  uniform  income,  they 
would  have  been  as  permanently  valuable  as  a  mortgage 
in  perpetuity  on  a  farm,  which  could  yearly  collect  from 
the  farmer  a  certain  quantity  of  products,  as  interest,  or 
income.  The  value  of  a  horse  depends  upon  his  ability  to 
perform  useful  labor  for  his  possessor ;  and  the  value  of 
money  depends  upon  its  capability  to  earn  for  its  owner 
by  being  loaned  on  interest.  Take  twenty  mortgages  for 
ten  years  on  twenty  different  farms.  Suppose  each  of 
these  farms  to  rent  for  sixty  dollars  a  year,  just  the  interest 
on  each  of  the  mortgages.  It  would  take  the  whole  pro- 
duce of  each  farm  to  pay  the  interest  on  each  mortgage. 
The  twenty  mortgages  would  take  the  rent  or  produce  of 
the  twenty  farms  for  ten  years.  In  one  month,  one  thou- 
sand dollars  could  be  easily  loaned  so  as  to  take  the 
entire  income  of  twenty  farms  for  ten  years.  Conse- 
quently, each  time  the  money  was  loaned,  it  would  accu- 
mulate an  income  which  would  be  as  valuable  to  its  owner 
as  a  farm  of  equal  value  leased  for  the  same  period ;  for 


59 


the  income  on  the  money  would  yearly  purchase  the 
whole  yearly  produce  of  the  farm. 

The  difference  between  money  and  the  farms  is,  that 
the  former  is  a  legal  representative  and  measure  of  value, 
and  the  latter  are  of  actual  value.  The  money  is  as  capa- 
ble of  representing  and  measuring  its  own  amount  of  value 
a  hundred  times  in  a  year,  and  creating  a  hundred  in- 
comes, as  the  pound  weight  is  of  determining  its  own 
amount  of  weight  a  hundred  times.  The  quantity  of  cloth 
measured,  and  the  weight  of  things  weighed,  cannot  be 
increased  by  the  number  of  times  that  the  measure  is  ap- 
plied to  them.  But  money  being  a  representative  of  value, 
and  being  endowed  by  law  with  the  power  to  accumulate 
by  interest,  makes  an  income  whenever  it  is  transferred 
from  one  to  another  as  a  loan. 

Anything  that  exists  in  perpetuity,  is  valuable  in  exact 
proportion  to  the  income  it  will  yearly  bring  to  its  owner. 
The  market  value  of  a  house,  store,  or  farm,  rises  or  falls 
with  the  rise  or  fall  of  its  yearly  rent  ;  and  the  value  of 
the  dollar  rises  or  falls  with  the  rise  or  fall  of  its  rent  or 
interest.  If  we  admit  both  the  property  and  the  money 
to  be  merchandise,  this  principle  cannot  be  true  in  one  case 
without  being  equally  true  in  the  other ;  therefore,  whether 
we  assume  money  to  be  of  actual,  or  of  legal  value,  to  keep 
its  value  uniform,  the  rate  of  interest  must  be  kept  uni- 
form. Doubling  the  capability  of  money  to  accumulate 
value,  doubles  the  value  of  the  dollar.  Its  nominal  value 
may,  and  does  remain  the  same — that  is,  it  retains  the 
name  of  dollar,  although  it  possesses  twice  its  ordinary 
value,  or  power  over  property  and  labor. 

The  same  principle  applies   to  all  measures.      The 


60 


length  of  the  yard-stick  being  doubled,  although  it  might 
still  retain  its  name,  would  measure  twice  as  much  cloth 
as  with  its  present  limits.  So  in  money,  while  its  denomi- 
nations remain  the  same,  its  power  to  accumulate,  which 
determines  its  value,  is  increased.  The  same  dollar  meas- 
ures more  or  less  property,  according  to  the  rate  of  in- 
terest. We  may  imagine  a  measure  fluctuating,  expanding 
and  contracting  between  certain  points  ;  as  a  yard- stick, 
made  of  some  elastic  material,  susceptible  of  being 
stretched  to  twice  or  thrice  its  ordinary  limits,  and  still 
called  a  yard-stick,  and  used  as  such.  But  no  one  would 
deem  himself  acquainted  with  the  actual  length  of  anything 
measured  by  this  yard-stick,  although,  if  it  were  the  legal- 
ized one,  it  could,  and  must  be  used  in  business. 

Measures  of  quantity  are  instituted,  and  their  length, 
bulk,  and  weight,  are  fixed  by  law,  and  not  by  individuals. 
The  measure  of  value  is  instituted  and  made  by  law ;  and, 
consequently,  it  is  fraudulently  used,  when  the  rate  of  in- 
terest upon  it,  which  determines  its  value,  is  altered  by 
individuals.  The  fundamental  proposition  of  Jeremy 
Bentham,  in  his  "  Defence  of  Usury,"  is  as  follows  : — 

"  No  man  of  ripe  years,  and  of  sound  judgment,  acting 
freely  and  with  his  eyes  open,  ought  to  be  hindered  with 
a  view  to  his  advantage,  from  making  such  bargain,  in  the 
way  of  obtaining  money,  as  he  thinks  fit ;  nor  (what  is  a 
necessary  consequence)  anybody  hindered  from  supplying 
him,  upon  any  terms  he  thinks  proper  to  accede  to." 

According  to  Mr.  Bentham's  theory,  when  money  is 
loaned,  the  rate  of  interest  to  be  paid  must  be  a  matter  of 
agreement  between  borrower  and  lender.  This  makes  the 
rate  of  interest  belong  to  the  system  of  free-trade,  whereas 


61 


it  no  more  belongs  to  this  system,  than  the  lengtn  of  the 
yard-stick,  or  the  weight  of  the  pound.  By  increasing  the 
rate  of  interest,  both  the  principal  of  the  money,  and  the 
interest  upon  it,  have  an  increased  power  over  property, 
as  much  as  a  pound  weight  increased  has  over  the  quantity 
of  products.  The  right  to  fix  the  value  of  money  is  as  much 
reserved  by  the  government,  as  the  right  to  fix  the  length 
of  the  yard,  or  the  weight  of  the  pound ;  and  the  regula- 
tion of  its  value  is  a  thousand  times  more  important  to  the 
people,  than  the  regulation  of  the  length  of  the  yard-stick, 
or  the  weight  of  the  pound. 

The  value  of  money  depends  upon  its  power  to  accu- 
mulate value  for  its  owner,  by  interest,  and  not  upon  the 
worth  of  its  material ;  as  the  value  of  a  paper  instrument, 
which  secures  a  ground-rent,  depends  upon  the  produc- 
tiveness of  the  land  on  which  it  is  secured,  and  not  upon 
the  inherent  qualities  of  the  paper.  If  the  land  were  per- 
manently unproductive,  the  lien  could  command  no  pro- 
ducts, and  would  be  worthless,  except  so  far  as  the  paper 
on  which  it  was  drawn  possessed  inherent  value.  Sup- 
pose the  lien  to  be  engraven  on  a  silver  plate,  instead  of 
on  paper,  and  to  be  made  in  perpetuity  for  $10,000,  at  six 
per  cent  interest  per  annum.  Let  the  annual  products  of 
the  land  be  sufficient  to  pay  for  the  labor  expended  upon 
it,  and  to  pay  the  ground-rent,  and  the  silver  on  which  the 
ground-rent  was  engraven  would  be  worth  ten  thousand 
dollars,  whether  the  plate  of  silver  on  which  it  was  drawn 
were  three  feet  square,  and  weighed  three  hundred  pounds, 
or  whether  it  were  three  inches  square,  and  weighed  but 
three  ounces.  If  the  ground-rent  on  each  plate  were  in 
perpetuity,  and  it  were  necessary  to  preserve  each  in  its 


proper  form,  to  keep  the  title  good,  although  so  great  a 
difference  existed  in  the  weight,  there  would  be  no  differ- 
ence in  the  value  of  the  two  plates,  for  both  would  secure 
the  same  annual  amount  of  interest.  If,  however,  the 
ground-rent  should  fail  because  of  some  defect  in  the  title, 
of  course  the  larger  plate  of  metal  would  be  worth  more 
than  the  smaller,  for  it  would  make  more  useful  and  ornamen- 
tal articles.  A  ground-rent  made  in  perpetuity  for  $10,000, 
secured  on  good  property  by  paper  instruments,  would  be 
as  valuable  to  any  owner,  as  the  larger  silver  plate.  For 
this  and  for  similar  purposes,  the  paper  is  as  much  supe- 
rior to  the  silver,  as  in  manufacturing,  the  power-loom  is 
superior  to  hand-weaving.  The  value  of  these  liens  on 
specific  pieces  of  land,  does  not  more  depend  on  the  pro- 
ductiveness of  the  land,  than  the  value  of  the  money  of  a 
nation  depends  upon  its  power  to  accumulate  an  income 
from  the  labor  or  property  of  borrowers.  The  value  of 
the  papers  which  secure  the  National  Debt  of  England 
would  cease,  if  the  government  should  pass  a  law  to  pay 
no  more  interest  upon  the  debt.  A  mere  legislative  en- 
actment could  annul  the  value  of  the  papers.  Laws,  then, 
give  them  their  worth,  and  their  worth  consists  in  their 
power  to  collect  a  yearly  income,  which  may  be  exchanged 
for  the  products  of  labbr. 

Money  could  not  answer  the  purposes  of  a  medium  of 
exchange,  unless  it  were  necessary  to  part  with  it  to  make 
it  valuable.  For  this  reason  it  is  made  to  accumulate  no 
interest  in  the  possession  of  its  owner ;  for  if  it  would  ac- 
cumulate interest  in  his  hands,  it  would  be  legally  equiva- 
lent to  a  bond  and  mortgage  bearing  interest,  or  to  pro- 
ductive property,  and  the  owner  would  not  need  to  part 
with  it  to  make  it  productive. 


63 


SECTION  V. 

THE    POWER   OF    MONEY    TO    EXCHANGE    VALUE, 

Another  power  of  money  is  to  exchange  property.  When 
it  is  made  the  public  representative  of  value,  and  the  in- 
terest is  fixed  at  a  just  rate,  it  is  fitted  to  perform  the 
duty  of  money,  which  is  the  equitable  exchange  of  prop- 
erty. All  goods,  wares,  and  merchandise,  although  they 
may  be  exchanged  for  money  a  number  of  times,  soon 
find  a  place  where  they  are  consumed ;  but  money  never 
reaches  a  point  where  it  can  be  used  except  for  exchange. 
Making  a  silver  dollar  an  equivalent  or  tender  in  payment 
for  a  debt  contracted  by  the  purchase  of  a  bushel  of  wheat, 
does  not  make  the  dollar  possess  the  nutritious  qualities 
of  the  wheat,  more  than  giving  a  note  upon  the  purchase 
of  a  hundred  bushels  of  corn,  makes  the  note  of  as  great 
actual  value  as  the  corn.  The  value  of  the  note  depends 
upon  its  power  to  exchange  itself  for  the  property  of  the 
drawer,  and  not  upon  the  paper  upon  which  the  note  is 
drawn.  But  the  value  of  the  corn  depends  upon  its  nutri- 
tious qualities,  and  not  upon  any  power  to  exchange  itself 
for  the  property  of  the  person  who  raised  or  sold  it.  The 
note  must  be  exchanged  for  property  before  it  can  be  use- 
ful to  its  owner ;  money  must  also  be  exchanged  for  prop- 
erty to  become  useful. 

This,  then,  is  the  distinction  between  articles  of  actual 
value  and  the  medium  of  exchange.  The  former  are  use- 
ful only  for  consumption ;  the  latter  must  be  exchanged  for 
articles  needed  for  consumption.  Hence,  money  is  not 
merchandise,  for  if  its  material  be  used  as  a  commodity — 


64 


if  coins  be  converted  into  watch-cases  and  ornaments,  the 
owner  must  keep  them  to  make  them  useful. 

Some  writers,  instead  of  considering  money  as  a  medium 
of  exchange,  call  it  capital  seeking  investment.  If  money 
be  capital,  it  is  already  invested ;  because  the  capital 
would  consist  in  the  inherent  value  of  the  material  of  the 
money,  and  not  in  the  thing  the  money  seeks  to  obtain. 
But,  when  money  has  found  one  investment,  it  is  as  much 
a  seeker  for  a  second  and  a  third  investment,  as  if  it  had 
not  been  invested  at  all.  It  is  always  seeking  investment, 
without  being  invested.  It  is  no  more  real  capital  than  a 
very  poor  horse,  of  which  the  appearance  is  such  that  he 
will  do  very  well  to  exchange  off.  But  if  he  should  finally 
fall  into  the  hands  of  a  person  who  had  not  the  good  for- 
tune to  exchange  him  again  for  something  else,  the  owner 
would  have  to  depend  upon  his  few  useful  qualities.  And 
if  a  currency  were  formed  in  the  various  nations  inde- 
pendently of  gold  and  silver,  and  coins  should  cease  to 
be  a  tender  in  payment  of  debts,  the  value  of  coins  would 
depend  upon  their  inherent  qualities,  as  metals,  as  much  as 
the  value  of  the  horse  when  he  could  be  no  longer  ex- 
changed for  more  than  his  actual  worth,  would  depend 
upon  the  little  labor  that  he  could  perform,  or  upon  his 
hide  and  bones.  The  price  of  the  gold  and  of  the  horse 
would  then  depend  upon  their  actual  usefulness,  and  not 
upon  any  capabilities  for  exchange. 

Money  is,  then,  a  combination  of  legal  powers,  expressed 
upon  metal,  paper,  or  some  other  substance ;  its  value  is 
the  standard  or  determiner  of  the  value  of  all  other  things, 
and  it  serves  as  a  public  medium  of  exchange  for  land,  la- 
bor, and  all  commodities. 


65 


SECTION  VI. 

THE  MATERIAL    OF   MONEY,  AND    THE   DISTINCTIONS   BETWEEN  MONEY 
AND    THE   MATERIAL    OF  WHICH    IT   IS    MADE. 

The  material  of  money,  gold,  silver,  paper,  or  any  other 
substance,  is  a  legalized  agent,  made  to  express  the  four 
properties,  or  powers  of  money,  and  render  them  availa- 
ble in  business  transactions. 

Common  usage  has  applied  the  term  measure  to  the  ma- 
terial, by  means  of  which,  length,  weight,  &c.,  are  ascer- 
tained ;  as  for  instance,  the  yard,  pound,  and  bushel,  in- 
stantly suggest  the  stick,  iron,  and  wood,  the  means  em- 
ployed, rather  than  the  abstract  length,  weight,  and  size, 
which  are,  in  reality,  the  things  signified  by  the  terms.  It 
matters  not  whether  the  yard-stick  and  pound  weight  be 
of  wood,  iron,  or  gold — length  and  weight  are  the  only 
properties  necessary  to  be  expressed  by  them,  and  possess- 
ing the  standard  limits,  their  material  is  a  matter  of  in- 
difference. Of  course,  some  material  is  indispensable ;  but 
the  only  thing  that  makes  one  substance  preferable  to  an- 
other, is  its  superior  convenience.  So  of  money ;  it  is  a 
matter  of  indifference  by  what  material  the  powers  or  prop- 
erties of  money  are  expressed,  for  the  material  is  merely  a 
substance  fixed  upon  by  law. 

The  natural  powers  of  any  material  do  not  make  it 
money.  Its  powers  and  agency  as  money  are  delegated 
to  it  by  law,  in  addition  to  its  natural  capabilities.  When 
gold  is  used,  the  powers  conferred  upon  it  make  it  an 
equivalent  for  every  species  of  property.  If  gold  had  not 
been  selected  for  the  material  of  money,  and  a  legal  power 

9 


66 


given  to  it  to  exchange  property,  and  to  accumulate  in 
terest  for  its  use,  no  one  would  have  occasion  for  more 
gold  than  he  needed  for  utensils  and  ornaments,  more  than 
he  would  for  more  clothes  than  he  could  wear,  or  more 
tools  than  he  could  use.  It  would  have  been  subjected  to 
the  same  laws  of  trade  as  other  merchandise,  and  must 
have  waited  a  demand  for  consumption  before  it  could  have 
been  sold.  It  is  clear  that  gold  possesses  no  peculiar  or 
inherent  excellence  to  endow  it  with  power  to  determine 
the  value  and  control  the  use  of  all  other  things.  But 
when  it  is  made  the  agent  of  these  legal  powers,  it  be- 
comes necessary  to  acquire  the  gold  in  order  to  discharge 
debts;  and  the  quantity  of  the  metal  being  limited,  its 
owners  are  enabled  to  extort  from  the  necessitous  a  very 
high  price  for  its  use.  If  gold  were  not  used  as  the  mate- 
rial of  the  currency,  its  abundance  would  cause  no  infla- 
tion of  business,  nor  would  its  scarcity  produce  distress, 
because,  compared  with  other  metals,  its  use  is  very  limited. 
The  following  statement  will  show  the  different  effects 
upon  our  own  people  from  the  use  of  the  precious  metals 
as  utensils,  and  their  use  as  the  material  of  money.  All 
will  probably  admit  that  there  are  twelve  thousand  fam- 
ilies in  the  city  of  New  York,  owning,  on  an  average, 
$800  worth  of  gold  and  silver  ware,  such  as  tea,  coffee, 
and  dinner  services,  vases,  ornaments,  &c.  Including 
jewelry,  the  amount  of  the  metals  would  probably  far  ex- 
ceed the  sum  named.  But  calculating  the.  twelve  thousand 
families  to  own  $800  worth  each,  they  will  own,  in  the 
aggregate,  $9,600,000 ;  while,  according  to  the  bank  re- 
ports, the  specie  in  all  the  banks  in  the  State  of  New 
York  on  the  1st  day  of  November,  1846,  amounted  to  but 


67 


$8,048,348.  Suppose  the  twelve  thousand  families  own- 
ing these  silver  and  gold  utensils  and  ornaments,  should 
collect  them  together  next  week,  and  ship  them  to  Eng- 
land. The  shipping  of  these  wares  would  have  no  more 
effect  upon  the  monetary  affairs  of  the  State  or  nation, 
nor  upon  business,  than  the  shipping  of  the  same  amount 
in  cotton  and  tobacco. 

But  let  the  people  drain  the  $8,048,348  of  coins  from 
the  banks  next  week,  and  ship  them  abroad,  and  what 
would  be  the  effect  upon  our  monetary  affairs,  our  busi- 
ness and  our  labor  ?  The  banks  throughout  the  State,  and 
throughout  the  United  States,  would  be  compelled  to  sus- 
pend specie  payments,  and  hundreds  of  thousands  of  our 
people  would  be  broken  up  and  thrown  out  of  employment. 
Yet,  by  shipping  the  gold  and  silver  wares,  more  than  one 
million  and  a  half  more  of  the  precious  metals  would  leave 
the  country,  than  by  shipping  the  coins.  The  shipment 
of  the  smaller  amount  would  shake  the  country  to  its  cen- 
tre, while  the  shipment  of  the  larger  amount,  could  not 
unfavorably  affect  business.  Yet  the  gold  and  silver  uten- 
sils and  ornaments  are  more  in  use  than  the  coins ;  for  the 
coins  are  mostly  in  kegs  and  boxes  in  the  vaults  of  banks, 
and  if  they  are  moved  at  all,  it  is  usually  from  the  vault  of 
one  bank  to  that  of  another,  without  even  emptying  them 
from  the  kegs.  If  money  is  merchandise,  why  would  not 
the  shipment  of  the  gold  and  silver  utensils  affect  the  busi- 
ness of  the  nation,  as  much  as  the  shipment  of  the  coins  ? 
The  same  twelve  thousand  families  are  doubtless  at  this 
time  the  owners  of  a  much  larger  amount  of  the  capital 
stocks  of  the  banks  than  the  $9,600,000;  and  if  they 
choose,  can  at  any  time  sell  stock  enough  to  draw  all  the 


68 


specie  from  the  banks,  and  can  thus  cause  a  suspension  of 
payments,  and  distress  producers,  even  without  shipping 
the  specie. 

If  the  value  of  money  inhere  in  the  precious  metals,  so 
that  a  certain  weight  naturally  possesses  a  certain  amount 
of  power  to  exchange  property,  and  still  is  itself  a  com- 
modity, the  value  of  which  is  fixed  by  law,  other  commo- 
dities made  of  the  same  naturally  precious  metals,  watch- 
cases,  spoons,  &c.,  should  likewise  be  subject  to  govern- 
mental scrutiny  and  restriction,  that  the  public  may  not 
be  imposed  upon  in  the  receipt  of  them  by  any  mixture 
of  alloy.  If  money  be  a  commodity,  why  do  governments 
pretend  to  fix  a  value  upon  coins,  and  not  upon  any  other 
commodity,  although  it  be  made  of  gold  or  silver  ?  If  a 
definite  value  be  assigned  to  one  commodity  by  legal  en- 
actment, a  definite  value  should  also  be  legally  assigned  to 
every  other  commodity,  that  each  may  sustain  a  just  rela- 
tion, according  to  the  amount  of  labor  necessary  to  man- 
ufacture or  produce  it.  If  money  be  a  commodity,  goods 
sold  might  as  well  be  made  payable  in  other  merchandise 
or  produce,  sugar,  beef,  &c.,  as  in  money.  Why  not  as 
well  sell  money  on  time  payable  in  goods,  as  goods  on 
time  payable  in  money  ?  If  money  be  merchandise,  why 
is  it,  that  it  can  be  at  all  times  exchanged,  in  any  part  of 
1  the  country,  even  when  all  other  more  necessary  commo- 
dities are  esteemed  almost  worthless,  compared  with  it  ? 
It  is  answered,  that  it  is  because  it  is  made  by  law  a  legal 
tender  in  payment  for  debts — that  it  has  this  superiority 
over  every  other  commodity.  But  the  very  answer  proves 
that  it  is  not  a  commodity ;  for  a  legal  tender  is  a  creation 
by  law  of  certain  properties  which  do  not  naturally  belong 


69 


to  any  substance,  but  which  are  made  to  represent  all  sub- 
stances, and  to  control  their  exchange. 

It  is  sometimes  said,  that  commodities  are  currency  as 
much  as  money,  because  they  can  be  and  are  exchanged 
for  it.  But  though  a  bushel  of  wheat  may  be  exchanged 
for  money,  it  does  not  possess  any  of  the  legal  and  dis- 
tinctive properties  of  money.  The  wheat  does  not  become 
currency  more  than  a  watch  would  become  land  by  being 
given  in  exchange  for  land. 

Some  argue  that  the  dollar  derives  its  value  from  the 
labor  required  to  mine  and  coin  the  silver  for  it.  They 
say  that  if  a  day's  labor  be  required  to  mine  the  silver  for 
a  dollar,  and  a  day's  labor  be  required  to  raise  a  bushel  of 
wheat,  the  silver  and  the  wheat  are  of  equal  worth,  and 
that  the  legal  acts  of  government  cannot  alter  the  value  of 
either.  But  if  the  equal  amount  of  labor  expended  make 
the  dollar  and  the  wheat  of  equal  value,  why  will  the  dollar 
at  certain  periods  buy  two  or  three  times  more  wheat,  or 
more  labor,  than  it  will  at  other  periods  ?  Why  does  not 
the  value  of  labor  and  of  wheat,  increase  equally  with  the 
value  of  the  dollar  ? 

When  the  products  of  labor  command  a  high  price,  la- 
bor also  commands  a  high  price.  A  given  quantity  of 
wheat  or  of  other  products  will  pay  for  nearly  the  same 
amount  of  labor  every  year.  But  if  the  price  of  products 
be  low,  the  employer  cannot  pay  to  labor  a  high  price  in 
money.  In  seasons  of  depressed  prices,  a  dollar  will  pur- 
chase double,  treble,  or  quadruple  the  amount  of  labor  that 
it  ordinarily  will,  and  this  difference  occurs  when  no  more 
labor  is  required  to  mine  and  coin  the  silver.  Let  those 
who  maintain  the  theory,  that  the  labor  required  to  pro- 


70 


cure  money  constitutes  its  value,  account,  if  they  can,  for 
these  facts,  so  as  to  satisfy  laborers  and  producers,  the  re- 
ward of  whose  labor,  and  the  price  and  sale  of  whose  pro- 
ducts it  so  nearly  affects. 

Money  is  said  to  be  intrinsically  worth  as  much  as  the 
property  it  will  purchase.  But  it  is  as  impossible  that  ten 
pounds  weight  of  gold  should  possess  as  great  actual  value 
as  the  four  thousand  bushels  of  corn,  or  four  thousand 
days'  labor  which  the  gold  will  purchase,  as  that  a  small 
quantity  of  poison  should  be  of  as  great  value  as  the  corn 
or  labor,  because  poison  is  frequently  necessary  as  a  med- 
icine to  restore  man  to  soundness  and  health.  As  many 
elements  for  the  support  of  man  exist  in  the  poison,  as  in 
the  money.  Both  are  useful  in  their  spheres,  the  former  to 
remove  obstructions  to  health,  the  latter  to  facilitate  the 
exchange  of  products.  Poison  is  of  little  value  compared 
with  food ;  and  money  is  as  little  valuable  compared  with 
property.  It  would  be  as  reasonable  to  esteem  the  comet 
which  appears  once  in  a  century,  more  valuable  to  us  than 
the  sun  that  daily  sheds  its  fertilizing  beams  upon  the 
earth,  as  to  esteem  the  actual  value  of  gold  and  silver 
equivalent  to  that  of  all  the  necessaries  of  life.  If  the 
quantity  of  gold  were  unlimited,  not  a  thousandth  part  as 
much  of  it  would  be  used  as  of  iron.  The  notion  that 
gold  and  silver  are  endowed  by  the  Creator  with  some 
mysterious  value  and  capabilities,  which  render  them  of 
greater  importance  than  the  common  products  of  labor, 
is  an  erroneous  and  pernicious  one.  Legal  enactments 
cannot  alter  the  inherent  properties  of  metals. 

The  common  opinion  that  the  material  of  a  currency 
must  be  something  scarce  and  difficult  to  procure,  that  the 


71 


limited  amount  may  render  it  permanently  valuable,  arises 
from  a  misconception  of  the  nature  of  money,  the  prop- 
erties of  which  are  entirely  independent  of  the  material. 
Money  consists  in  the  legal  powers  to  represent,  measure, 
accumulate,  and  exchange.  It  receives  its  powers  from 
law.  If  gold  and  silver  should  become  as  abundant  as 
iron  and  lead,  the  only  difficulty  in  maintaining  them  the 
materials  of  a  currency,  would  be  the  difficulty  of  protect- 
ing them  from  counterfeit.  If  they  could  be  protected,  it 
would  be  as  unnecessary  to  abandon  them  for  a  currency 
on  account  of  their  abundance,  as  to  abandon  the  use  of 
paper  in  making  obligations,  because  more  exists  than  can 
be  used  for  that  purpose.  If  the  quantity  of  gold  and  sil- 
ver were  unlimited,  and  that  part  of  it  which  was  needed 
for  a  currency  were  made  a  lien  upon  and  representative 
of  property,  there  would  be  nearly  as  great  a  difference 
between  the  value  of  the  metals  so  used  and  bullion,  as 
there  now  is  between  a  paper  obligation  that  is  a  lien  upon 
valuable  property,  and  a  piece  of  blank  paper. 

For  ages  gold  and  silver  have  been  esteemed  precious 
metals,  containing  a  large  amount  of  intrinsic  value,  al- 
though their  inadequacy  to  /supply  natural  wants  is  mani- 
fest, by  supposing  a  man,  with  a  bag  of  coins,  on  a  desert 
island,  and  without  the  power  to  exchange  them  for 
other  articles.  These  metals  have  intrinsic,  or  actual 
value,  and  this  value  consists  in  their  utility  for  utensils 
and  ornaments  ;  their  malleability,  ductility  and  beauty 
rendering  them,  for  some  purposes,  superior  to  all  other 
metals.  But  it  will  be  confessed,  that  we  could  more 
easily  dispense  with  them,  than  with  any  of  the  more 
abundant  metals,  which  are  in  more  general  and  constant 


72 


use,  and  the  loss  of  which  would  seriously  impair  our 
comfort. 

In  early  ages,  gold  and  silver  were,  doubtless,  selected 
for  the  material  of  money  on  account  of  their  scarcity, 
and  the  amount  of  labor  necessary  to  procure  them ;  the 
same  reason  that  led  the  American  Indians  to  select  tfye 
beaver-skin  for  a  standard  of  value,  by  which  the  value  of 
all  other  skins  and  commodities  was  estimated.  It  has 
been  already  explained,  that  gold  and  silver,  when  used  as 
money,  cease  to  have  any  other  use.  These  metals  have, 
however,  received  a  governmental  sanction,  as  the  material 
of  money.  The  laws  require  that  coins  used  as  a  public 
tender  shall  contain  a  certain  weight  of  the  authorized 
metal — without  which,  they  are  illegal,  and  cannot  be  en- 
forced as  a  tender.  But  the  only  reason  that  they  are  not 
received  is,  that  they  are  unsanctioned  by  law.  If  coins 
of  base  metal  were  endowed  by  law  with  the  properties  of 
money — that  is,  were  made  representatives  of  actual  val- 
ue, capable  of  accumulating  by  interest,  and  a  public  ten- 
der for  debts,  they  would  answer  every  purpose  of  money 
equally  well  with  coins  of  pure  metal.  They  could  re- 
present, measure,  accumulate,  and  exchange  property, 
and  these  are  the  sole  properties  and  uses  of  money. 
Therefore,  they  would  be  money,  for  anything  that  pos- 
sesses the  properties  of  money,  without  division,  subtrac- 
tion, or  increase,  is  money.  But  if  the  metal  were  used 
for  purposes  of  dentistry,  the  difference  between  the  pure 
and  the  base  would  at  once  appear ;  for  the  metal  would 
then  be  used  otherwise  than  as  the  material  of  money,  and 
its  utility  would  not  depend  upon  its  legal  powers,  but  upon 
its  natural  capabilities  as  a  metal. 


73 


The  value  of  money,  then,  depends  upon  its  powers 
to  represent,  measure,  accumulate,  and  exchange  value. 
These  powers,  given  to  any  convenient  material  by  Con- 
gressional enactment,  will  prepare  and  qualify  it  for  a  me- 
dium of  exchange,  and  in  every  particular  constitute  it 

money. 

10 


CHAPTER  III. 

THE  RATES  OF  INTEREST  THE  GOVERNING  POWER 
OF  DISTRIBUTION  TO  LABOR  AND  CAPITAL. 


SECTION  I. 

THE  POWER  OF  CAPITAL  TO  ACCUMULATE  PROPERTY  AND 
LABOR  ACCORDING  TO  THE  RATE  OF  INTEREST. 

IN  the  introduction,  labor  was  said  to  be  the  chief 
producer  of  wealth,  and  the  preceding  chapter  has  been 
devoted  to  the  consideration  of  the  nature  and  powers  of 
money.  The  present  chapter  will  exhibit  the  laws  which 
govern  distribution,  and  will  show  the  practical  effects  of 
certain  rates  of  interest  upon  producers. 

The  Constitution  of  the  United  States,  Act  I.,  Sec.  VIII. 
5.,  declares,  "  The  Congress  shall  have  power  to  coin 
money,  regulate  the  value  thereof,  and  of  foreign  coin,  and 
fix  the  standard  of  weights  and  measures."  Money  is  the 
legal  standard  of  value,  by  which  the  value  of  all  articles 
for  sale  must  be  determined.  The  rate  of  interest  fixes 
the  value  of  money.  Its  value  is  not  fixed  by  the  quan- 
tity or  the  quality  of  the  material,  more  than  the  size  of 
the  bushel  is  fixed  by  the  quantity  and  quality  of  the  wood. 
The  rate  of  interest  maintained  upon  loans  of  money,  de- 


75 


termines  what  proportion  of  the  earnings  of  labor  shall  be 
paid  for  the  use  of  capital,  and  what  proportion  shall  be 
paid  to  the  laborers  for  their  productions.  If  interest  on 
money  be  maintained  at  a  high  rate,  rents  on  property  will 
also  be  high. 

There  are  but  two  purposes  to  which  the  yearly  pro- 
ducts of  labor  can  be  applied.  One  is  the  payment  of  the 
yearly  rent  or  interest  on  the  capital  employed,  and  the 
other  is  the  payment  of  labor.  If  laborers  pay  to  capital, 
as  use  or  interest  for  the  year,  their  whole  surplus  pro- 
ducts, the  laborers,  as  a  body,  work  merely  for  a  subsist- 
ence, and  the  capital  takes  their  whole  surplus  earnings. 
The  laborer  receives  for  his  year's  toil,  food,  clothing,  and 
shelter  only,  and  these,  perhaps,  of  the  poorest  kind ;  while 
the  capitalist  lives  in  luxury,  increases  the  number  of  his 
bonds  and  mortgages,  or  with  his  income  buys  land  or 
builds  houses  to  let,  which  will,  in  succeeding  years,  take 
a  still  greater  sum  from  the  laborer.  The  law  of  interest, 
or  per  centage  on  money,  as  much  governs  the  rent  or  use 
of  all  property,  and  consequently  the  reward  of  labor,  as 
the  law  of  gravitation  governs  the  descent  of  water.  If 
interest  on  money  be  too  high,  a  few  owners  of  capital 
will  inevitably  accumulate  the  wealth  or  products  of  the 
many.  No  body  of  men  can,  by  labor,  offer  successful  re- 
sistance to  accumulation  by  the  law  of  interest,  more  than 
they  can  by  labor  alter  the  effect  of  the  law  of  gravitation. 
The  evil  is  legislative,  and  the  remedy  must  be  legislative, 

Money  loaned  on  interest,  or  invested  in  property,  is 
doubled  in  a  certain  length  of  time,  according  to  the  rate 
of  interest  charged.  When  this  rate  is  too  high,  it  re- 


76 

quires  the  principal  to  be  doubled  in  so  short  a  time,  that 
*  the  borrower  is  compelled  to  give  all  his  surplus  products 
as  interest  or  rent  on  the  capital ;  whereas,  justice  requires 
that  he  .should  pay  for  its  use  only  a  moderate  per  centage, 
and  himself  retain  the  chief  surplus  of  his  labor. 

The  following  illustration,  calculating  property  to  accu- 
mulate or  double  at  certain  rates  of  yearly  per  centage,  in 
the  same  manner  as  money,  will  clearly  exhibit  the  various 
results  to  laborers  from  various  rates  of  interest.  A.,  B., 
and  C.,  are  young  men,  who  have  just  come  of  age.  C.  is 
heir  to  $10,000,  while  A.  and  B.  are  mechanics,  without 
capital.  C.  contracts  with  A.  and  B.  to  build  a  house 
which  shall  cost  $5,000,  on  a  lot  for  which  he  paid  $5,000. 
The  house  and  lot  together  are  worth  $10,000.  C.  leases 
this  property  to  A.  and  B.,  and  charges  them  seven  per 
cent  upon  its  cost,  clear  of  insurance,  taxes,  and  repairs. 
The  interest  is  payable  once  a  quartet.  A  rate  of  interest 
of  seven  per  cent  per  annum,  paid  quarterly,  will  accumu- 
late a  sum  equal  to  the  principal  loaned  or  invested  in 
property  in  ten  years.  In  this  period,  A.  and  B.  are  com- 
pelled to  buy  another  lot,  build  upon  it  another  as  good  a 
house,  and  pay  the  lot  and  house  to  C.  for  the  use  of  the 
house  they  occupy.  In  twenty  years,  if  A.  and  B.  retain 
the  use  of  the  house  and  its  accruing  rents,  they  must  pay 
C.  three  houses ;  in  thirty  years,  they  must  pay  him  seven 
houses;  in  forty  years,  fifteen  houses;  in  fifty  years, 
thirty-one  houses ;  in  sixty  years,  sixty-three  houses ; 
and  in  seventy  years,  one  hundred  and  twenty-seven 
houses.  In  seventy  years  all  these  are  built  by  A.  and  B., 
and  paid  to  C.  for  the  use,  or  as  the  accumulation  on  the 
one  that  he  leased  to  them.  The  one  hundred  and  twenty- 


77 

seven  lots  which  A.  and  B.  earn  the  money  to  buy,  cost 
$635,000,  and  the  buildings  cost  an  equal  amount,  making 
together,  $1,270,000 ;  which  sum  is  paid  to  C.  for  seventy 
years'  rent  of  one  house  and  lot  worth  $10,000.  At  the 
expiration  of  the  lease,  the  original  house  must  be  returned 
to  its  owner,  as  well  as  the  rent.  If,  instead  of  being  in- 
vested in  the  house  and  lot,  the  $10,000  were  loaned  on 
interest  at  seven  per  cent,  and  the  interest  were  collected 
and  re-loaned  quarterly,  the  money  would  accumulate  in  a 
given  period  precisely  the  same  amount  as  the  property. 

Now,  suppose  interest  to  be  at  three  per  cent  per  annum, 
and  A.  and  B.  to  build  the  house,  and  pay  C.  three  per 
cent  annually  on  its  cost  of  $10,000.  This  is  $300,  instead 
of  $700  a  year ;  and,  at  this  rate,  the  interest  on  money 
collected  and  re-loaned  quarterly,  requires  nearly  twenty- 
four  years  to  accumulate  a  sum  equal  to  the  principal. 
Therefore,  in  twenty-four  years  A.  and  B.  would  give  C. 
another  house ;  and,  in  seventy-two  years,  seven  houses, 
instead  of  one  hundred  and  twenty-seven,  which  they  are 
compelled  to  do  at  seven  per  cent  interest.  The  labor  of 
building  the  houses  is  neither  increased  by  a  high  rate,  nor 
diminished  by  a  low  rate  of  interest. 

If  C.  let  his  house  to  A.  and  B.  at  six  per  cent,  in  about 
twelve  years  the  income  or  rent  will  equal  the  principal ; 
therefore,  at  the  expiration  of  that  period,  A.  and  B.  must 
pay  C.  another  house,  and,  in  twenty-four  years,  they  must 
pay  him  three  houses.  But  if  C.  lease  the  house  to  them 
for  twenty-four  years  at  three  per  cent,  A.  and  B.  return 
him  his  house,  adding  one  to  it  as  *ts  rent,  and  retain  two 
houses  as  their  own  surplus.  With  interest  at  three  per 
cent,  in  twenty-four  years  A.  and  B.  would  each  own  a 


78 


house  and  lot  worth  $10,000 ;  while,  with  the  interest  on 
money  loaned  or  invested  in  property  at  six  per  cent,  both 
would  still  be  tenants,  although  they  would  have  per- 
formed, in  both  cases,  the  same  amount  of  labor.  With 
interest  at  three  per  cent,  in  forty-eight  years  they  would 
give  C.  three  houses,  instead  of  fifteen,  as  at  six  per  cent, 
and  they  would  own  twelve  as  the  surplus  product  of  their 
labor.  But  at  six  per  cent,  C.'s  capital  would  compel  A. 
and  B.  to  continue  his  tenants,  and  to  build  for  him  sixteen 
houses  more  during  the  next  twelve  years. 

Take  another  example  of  the  accumulation  of  property 
at  seven  per  cent  interest.  At  the  age  of  twenty-one,  D. 
owns  a  well  improved  farm  of  one  hundred  acres.  He 
leases  it  to  E.  at  an  interest  of  seven  per  cent,  payable  in 
land,  as  the  interest  on  money  is  payable  in  money.  At 
the  close  of  the  year,  E.  pays  D.  seven  acres  of  as  good 
quality  as  the  one  hundred  rented,  and  with  a  pro  rata  pro- 
portion of  buildings  upon  them.  D.  continues  to  lease  the 
farm  to  E.,  requiring  him  to  pay  the  rent  in  land  half  year- 
ly, as  interest  on  money  is  paid  half  yearly  in  money ;  and 
to  pay  rent  on  the  land  so  paid,  as  the  borrower  of  money 
pays  interest  on  the  interest  which  he  adds  half  yearly  to  the 
principal.  In  ten  years,  E.  must  pay  one  farm ;  in  twenty 
years,  three  farms ;  in  thirty  years,  seven  farms ;  in  forty 
years,  fifteen  farms ;  in  fifty  years,  thirty-one  farms ;  in 
sixty  years,  sixty-three  farms  ;  and  in  seventy  years,  one 
hundred  and  twenty-seven  farms ;  all  as  highly  cultivated 
as  the  one  originally  leased.  At  the  age  of  ninety-one,  D. 
can  bequeath  to  his  posterity  one  hundred  and  twenty- 
seven  farms,  from  the  mere  rent  on  one.  These  farms  E. 
must  earn  by  the  labor  of  seventy  years,  and  pay  to  D.  for 


79 


the  use  of  one  farm.  If  he  could  perform  the  labor  to 
gain  one  hundred  and  twenty-seven  farms  to  pay  to  D.  in 
rent,  and  the  interest  or  rent  were  reduced  to  one  per 
cent,  in  seventy  years  he  would  pay  to  D.  only  about  one 
farm  as  rent,  and  would  retain  one  hundred  and  twenty-six 
as  the  surplus  of  his  labor. 

The  following  statement  shows  the  effect  upon  pro- 
ducers of  a  rate  of  interest  on  capital  of  six  per  cent  per 
annum.  The  yearly  income  of  our  most  wealthy  citizen 
from  dividends  on  state,  bank,  and  other  stocks,  money 
loaned  on  bonds  and  mortgages,  and  rents  of  property,  is 
said  to  amount  to  $2,000,000.  Take  the  farmers  of  the  six 
New  England  States,  include  those  of  New  York  and  New 
Jersey,  and  it  is  very  doubtful  whether,  after  paying  ne- 
cessary expenses,  each  makes  a  yearly  gain  of  more  than 
one  hundred  dollars.  This  calculation  would  require  the 
use  of  twenty  thousand  farms,  and  the  surplus  earnings 
of  twenty  thousand  farmers  and  their  families,  to  clear 
$2,000,000  a  year.  However  difficult  it  might  be  to  trace 
the  ways  and  means  by  which  this  income  is  gathered,  it 
takes  $2,000,000  worth  of  the  surplus  products  of  labor  to 
pay  the  legal  accumulation  on  the  capital.  Suppose  able- 
bodied  men  to  earn  one  dollar  per  day,  for  an  average  of 
two  hundred  and  seventy-five  days  in  each  year — i.  e., 
$275.  Two  millions  of  dollars  would  annually  hire  and 
pay  for  the  labor  of  seven  thousand  two  hundred  and  sev- 
enty-six men.  Allow  the  receiver  of  the  income  to  ex- 
pend yearly,  for  his  own  support,  as  much  as  seventy- three 
laborers  earn,  and  he  will  still  receive  a  clear  gain  of 
$1,980,000  yearly,  the  entire  earnings  of  seven  thousand 
two  hundred  and  three  men.  Calculate  the  interest  on 


$1,980,000  at  six  per  cent,  and  the  next  year  it  will  make 
an  addition  to  his  income  of  $118,800;  which  sum  would 
pay  for  the  labor  of  four  hundred  and  thirty-two  men,  in 
addition  to  the  number  employed  in  the  preceding  year. 

What  is  the  probable  surplus  that  each  of  these  laboring 
men  would  yearly  retain,  after  deducting  from  the  $275 
their  own  expenses,  and  those  of  their  families  ?  Can  any 
laboring  community  be  prosperous,  and  pay  so  great  an 
amount  of  interest  on  capital  ?  The  legal  power  of  capital 
to  accumulate  an  undue  rate  of  interest,  compels  these 
laborers  to  give  all  their  surplus  products  to  one  man  for 
the  use  of  capital,  while  they  and  their  families  are  de- 
prived of  a  good  subsistence,  and  are  obliged  continually 
to  increase  that  capital,  which  yearly  exercises  a  greater 
power  over  their  labor. 

In  order  that  the  power  of  the  ordinary  rates  of  inter- 
est to  concentrate  property  in  the  hands  -of  capitalists  may 
be  more  clearly  seen,  in  the  following  illustrations  the  con- 
tracts shall  be  based  upon  wheat  instead  of  upon  money. 
Take  the  yearly  income  of  Mr.  A.,  say  $2,000,000.  If  his 
money  be  loaned,  or  his  property  be  leased  at  six  per  cent 
on  its  valuation,  he  must  be  worth  thirty-three  and  a  third 
millions  of  dollars.  Suppose  Mr.  A.,  instead,  to  be  worth 
thirty-three  and  a  third  millions  of  bushels  of  wheat.  Let 
him  lend  the  wheat  instead  of  the  money  at  six  per  cent, 
and  the  interest  will  be  precisely  two  millions  of  bushels. 
The  farmers  who  borrow  the  wheat,  and  give  their  bonds 
and  mortgages  upon  their  farms  to  secure  the  payment  of 
the  principal  and  the  interest,  must  sow,  reap,  and  thrash 
out  two  millions  of  bushels,  transport  them  to  New  York, 
and  put  them  into  Mr.  A's  storehouses,  to  pay  the  interest 


81 


for  one  year.  What  a  pile  of  wheat  is  this  for  one  man's 
use,  gained,  too,  without  his  sowing  or  harvesting  a  bushel 
of  it.  Suppose  the  interest  to  be  at  one  per  cent,  instead 
of  at  six  per  cent,  and  Mr.  A.  to  lend  these  same  farmers 
the  thirty-three  and  a  third  millions  of  bushels  of  wheat  at 
this  per  centage  ;  at  the  end  of  the  year  they  will  have  to 
pay  him  only  three  hundred  and  thirty- three  thousand 
three  hundred  and  thirty- three  arid  a  third  bushels  of 
wheat,  to  satisfy  the  interest.  The  farmers  will  then  re- 
tain one  million  six  hundred  and  sixty-six  thousand  six 
hundred  and  sixty-six  and  two-third  bushels  for  their  own 
use,  or  to  sell  to  others,  or  to  pay  toward  the  liquidation 
of  the  principal  of  the  debt.  With  interest  at  one  per 
cent,  they  will  as  much  satisfy  Mr.  A.'s  yearly  claims,  by 
paying  him  three  hundred  and  thirty-three  thousand  three 
hundred  and  thirty-three  and  a  third  bushels  of  wheat,  as 
they  would  at  an  interest  of  six  per  cent,  by  paying  two 
millions  of  bushels.  If  each  acre  of  land  produce  fifteen 
bushels  of  wheat,  and  the  farmers  cultivate  on  an  average 
ten  acres  each,  it  will  take  the  labor  of  thirteen  thousand 
three  hundred  and  thirty-three  farmers,  and  the  use  of  one 
hundred  and  thirty-three  thousand  three  hundred  and 
thirty-three  and  a  third  acres  of  land  to  pay  the  yearly 
interest  of  six  per  cent  on  the  thirty-three  and  a  third 
millions  of  bushels  of  wheat  borrowed  of  Mr.  A.  But  if 
interest  be  at  one  per  cent,  and  the  farmers  continue  to 
pay  Mr.  A.  the  two  millions  of  bushels  yearly,  in  eighteen 
years  and  four  months  they  will  pay  off  both  the  principal 
and  the  interest  of  the  debt. 

Suppose  the  farmers  to  pay  six  per  cent  interest,  i.  e., 
two    millions    of  bushels   of  wheat  on    the    loan    for 

11 


82 


twenty  years,  they  will  pay  forty  millions  of  bushels  to  sat- 
isfy the  interest,  and  will  still  owe  the  thirty-»three  and  a 
third  millions  principal.  The  following  table  shows  the 
result  at  the  end  of  twenty  years,  if  Mr.  A.,  as  he  yearly 
receives  the  two  millions  of  bushels  of  wheat  from  the  far- 
mers, should  lend  them  out  to  mechanics  at  six  per  cent 
interest. 

TABLE 

OF  THE  ACCUMULATION  OF  PRODUCTS  AT  SIX  PER  CENT  INTEREST. 

Bushels  of  wheat 

1st  year  Mr.  A.  collects  from  the  farmers  and  loans  to  mechanics 2,000,000 

1st  year's  interest  at  6  per  cent  on    2    millions  paid  by  mechanics 120,000 


2,120,000 


2d 

"                "               33*            " 

formers  

.    .     2,000,000 

2d 

u               it                2              " 

4,120,000 
247,200 

3d 

"                "               33i            " 

4,367,200 
2,000,000 

3d 

M                it                2              it 

6,367,200 
382,032 

4th 

"                •«               331            " 

6,749,232 
2,000,000 

4th 

U                           tf                            2                        '• 

mechanics         , 

8,749,232 
524  954 

5th 

tt                      u                     331                  (i 

farmers 

9,274,186 
2  000  000 

5th 

*<                «                2              " 

mechanics       . 

11,274,186 
676  451 

6th 

«                               «                             331                        M 

farmers            •  . 

11,950,637 
2  000  000 

6th 

«                «                2              " 

mechanics       • 

13,950,637 
837  038 

7th 

M                              «                             031                        U 

farmers    .  •     . 

14,787,675 
2,000,000 

7th 

If                    ft                     0                  (* 

mechanics.... 

16,787,675 
,    1,007,260 

17,794,935 


83 


Bushels  of  wheat. 

8th  year  Mr.  A.  collects  from  the  fanners  and  loans  to  mechanics 17,794,935 

8th  year's  interest  at  6  per  cent  on  33£  millions  paid  by  farmers 2,000,000 


8th              «               " 

2 

mechanics  

19,794,935 
1,187,696 

9th              "               " 

33i 

20,982,631 
2,000,000 

9th              "               " 

2              M 

22,982,631 
,  1,378,957 

10th            ««               " 

33*            " 

24,361,588 
.    2,000,000 

10th            '*               " 

2              " 

mechanics       . 

26,361,588 
....    1,581  696 

llth            "               " 

334            «• 

27,943,284 
2,000,000 

llth            "               " 

2              " 

mechanics.       . 

29,943,284 
1,796,597 

12th            "               " 

33*            " 

31,739,881 
......     2,000,000 

12th            ««               lf 

2             •'* 

mechanics  

33,739,881 
....    2,024,393 

13th            ir               '• 

33*            " 

farmers       ..  . 

35,764,274 
2  000  000 

13th            '*               " 

2              " 

37,764,274 
2,265,856 

14th            "               «« 

33*            " 

farmers.  

40,030,130 
,  2,000,000 

14th            **               " 

2              " 

mechanics 

42,030,130 
2  521  808 

15th            M               ** 

33*            " 

farmers  

44,551,938 
2,000,000 

15th            '«               «« 

2             " 

mechanics  

46,551,938 
2,793,116 

16th            «•               u 

334            «• 

49,345,054 
2,000,000 

16th             **                " 

2              " 

mechanics        . 

51,345,054 
.  .     3  080,703 

17th            «               « 

334           " 

54,425,757 
,    2.000,000 

56,425,757 


84 

Bushels  of  wheat 

17th  year  Mr.  A.  collects  from  the  farmers  and  loans  to  mechanics 56,425,757 

1 7th  year's  interest  at  6  per  cent  on  2  millions  paid  by  mechanics 3 ,3  85 ,546 

59,811,303 
18th  «  "  33£  «  farmers 2,000,000 

61,811,303 
18th  "  "  2  "  mechanics 3,708,678 

65,519,981 
19th  ••  "  33$  "  farmers 2,000,000 

67,519,981 
19th  "  ••  2  "  mechanics. 4,051,199 

71,571,180 
20th  "  M  33J  "  farmers 2,000,000 


73,571.180 

In  twenty  years,  the  interest  on  thirty-three  and  a 
third  millions  of  bushels  of  wheat,  at  six  per  cent,  accumu- 
lates to  seventy  three  millions  five  hundred  and  seventy- 
one  thousand  one  hundred  and  eighty  bushels.  The  in- 
terest on  this  interest,  for  a  year,  amounts  to  four  millions 
four  hundred  and  fourteen  thousand  two  hundred  and 
seventy  bushels ;  and  this  would  be  yearly  due  from  the 
mechanics.  If  the  mechanics,  instead  of  paying  the  inter- 
est in  wheat,  should  pay  it  in  manufactured  articles,  they 
would  pile  up  .an  enormous  quantity  of  goods  in  Mr.  A.'s 
storehouses  for  his  yearly  use,  and  Mr.  A.  would  still  re- 
ceive two  millions  of  bushels  of  wheat  yearly  from  the 
farmers.  With  interest  at  six  per  cent,  at  the  end  of 
twenty  years,  the  farmers  would  owe  Mr.  A.  the  thirty- 
three  millions  three  hundred  and  thirty-three  thousand 
three  hundred  and  thirty-three  and  a  third  bushels  of 
wheat ;  and  the  mechanics  would  owe  him  seventy-three 
millions  five  hundred  and  seventy-one  thousand  one  hun- 
dred and  eighty  bushels — together,  one  hundred  and  six 
millions  nine  hundred  and  four  thousand  five  hundred 


85 

and  thirteen  bushels.  They  would  owe  Mr.  A.  just  the 
same  amount  of  wheat  that  they  would  owe  him  of  money, 
if  they  had  borrowed  the  thirty-three  and  a  third  mill- 
ions of  dollars,  and  paid  interest  thereon  at  six  per  cent. 
The  following  table  will  exhibit  the  indebtedness  of  the 
people  to  Mr.  A.  at  the  end  of  the  twenty  years,  if  he 
should  lend  the  thirty-three  and  a  third  millions  of  bush- 
els of  wheat  to  the  farmers  at  one  per  cent,  instead  of  at 
six  per  cent ;  and  should,  during  the  twenty  years,  collect 
the  interest  yearly  from  the  farmers  and  loan  it  to  me- 
chanics ;  and  then  yearly  collect  the  interest  from  the  me- 
chanics, and  loan  it  to  other  mechanics  at  one  per  cent. 
The  interest  on  thirty-three  and  a  third  millions  at  one 
per  cent  amounts  to  three  hundred  and  thirty-three  thou- 
sand three  hundred  and  thirty-three  and  a  third  bushels 
yearly. 

TABLE 

OF  THE  ACCUMULATION  OF  PRODUCTS  AT  ONE  PER  CENT  INTEREST. 

Bushels  of  wheat. 

1st  year  Mr.  A.  collects  from  the  formers  and  loans  to  mechanics 333,333 

1st  year's  interest  at  one  per  cent  on     333,333$  bushels,  paid  by  mechanics...          3,333 

336,666 
2d  «  "  33,333,333$  "  farmers 333,333 

669,999 
2d  "  '*  333,333$  *  mechanics...         6,700 

676,699 
3d  «  «  33,333,333$  "  formers 333,334 

1,010,033 
3d  ««  «  333,333$  "  mechanics...        10,100 

1,020,133 
4th  «  "  33,333,333$  «  farmers 333,333 

1,353,466 
4th  a  «•  333,333$  "  mechanics..        13,535 

1,367,001 
5th  <«  «          33,333,333$  "  formers 333,333 

1,700,334 


86 


Bushels  of  wheat 


5th  year's  interest  at  1  per  cent  on         333,333$  bushels  paid  by  mechanics  .  . 

1  n',003 

6th 

"                   "           33,333,333$ 

4<           farmers  

1,717,337 
333,334 

6th 

333,333$ 

"            mechanics  .  . 

2,050,671 
20,507 

7th 
7th 
8th 

"                   "           33,333,333$ 
«                   «•                333,333$ 
««                   "           33,333,333$ 

"           farmers  
"            mechanics.. 
"           farmers  

2,071,178 
333,333 

2,404,511 
24,045 

2,428,55rf 
333,333 

8th 

«                   «               333,333$ 

"            mechanics.. 

2,761,889 
27,619 

9th 
9th 
10th 
10th 

«                   «           33,333,333$ 
•«                   "               333,333$ 
"                   •-           33,333,333$ 
«                333,333$ 

"            farmers  

2,789,508 
333,334 

3,122,842 
31,228 

"            mechanics  .  . 
"            formers 

3,154,070 
333,333 

"            mechanics  .  . 

3,487,403 

34,874 

llth 

33,333,333$ 

••            farmers  

3,522,277 
333,333 

llth 

«                   «                333,333$ 

"           mechanics.. 

3,855,610 
38,556 

12th 
12th 
13th 

«                  «           33,333,333$ 
«                   "                333,333$ 
«                   «           33,333,333$ 

"            farmers  
"            mechanics.. 
"           farmers  

3,894,166 
333,334 

4,227,500 
42,275 

4,269,775 
333,333 

13th 

«                   »                333,333$ 

"           mechanics.. 

4,603,108 
46,031 

14th 

"                   «•           33,333,333$ 

•'           farmers  

4,649,139 
333,333 

14th 

«                  «               333^33$ 

U'           mechanics., 

4,982,472 

,      49,825 

5,032,297 


87 


Bushels  of  wheat. 

15th  year  Mr.  A.  collects  from  the  farmers  and  loans  to  mechanics 5,032,297 

15th  year's  interest  at  1  per  cent  on  33,333,333$  bushels  paid  by  farmers 333,334 


15th 
16th 
16th 
17th 
17th 
18th 
18th 
19th 
19th 
20th 


333,333$ 
33,333,333$ 

333,333$ 
33,333,333$ 

333,333$ 
33,333,333$ 

333,333$ 
33,333,333$ 

333,333$ 
33,333,333$ 


5,365,631 
mechanics..       53,656 


5,419,287 
farmers 333,333 

5,752,620 
mechanics..       57,526 

5,810,146 
farmers 333,333 

6,143,479 
mechanics..       6*  ,435 

6,204,914 
farmers 333,334 

6,538,248 
mechanics..       65,362 

6,603,630 
farmers 333,333 


6,936,963 
mechanics..       69,370 

7,006,333 
farmers......    333,333 

7,339,666 


If  Mr.  A  should  loan  his  thirty-three  and  a  third  millions 
of  bushels  of  wheat  to  the  farmers  at  one  per  cent,  and 
yearly  collect  and  re-loan  the  interest  to  mechanics,  and 
then  collect  and  re-loan  it  at  one  per  cent,  at  the  end  of 
twenty  years,  the  mechanics  would  be  indebted  to  him 
seven  millions  three  hundred  and  thirty-nine  thousand  six 
hundred  and  sixty-six  bushels,  instead  of  being  indebted  to 
him  seventy-three  millions  three  hundred  and  seventy-one 
thousand  one  hundred  and  eighty  bushels.  The  farmers 
would  owe  him  thirty-three  millions  three  hundred  and 
thirty-three  thousand  three  hundred  and  thirty-three  and 
a  third  bushels,  and  the  mechanics  would  owe  him  seven 


88 


millions  three  hundred  and  thirty-nine  thousand  six  hun- 
dred and  sixty-six — together,  forty  millions  six  hundred 
and  seventy-two  thousand  nine  hundred  and  ninety-nine 
bushels.  Deduct  this  sum  from  the  one  hundred  and  six 
millions  nine  hundred  and  four  thousand  five  hundred  and 
thirteen  bushels,  which  he  would  accumulate  by  an  inter- 
est of  six  per  cent  on  his  loan,  and  there  remains  a  bal- 
ance of  sixty-six  millions  two  hundred  and  thirty-one 
thousand  five  hundred  and  fourteen  bushels,  which  would 
be  saved  by  the  mechanics  and  farmers  at  one  per  cent 
interest.  The  increased  indebtedness  of  the  people  at  six 
per  cent,  i.  e.,  an  increase  of  sixty-six  millions  two  hundred 
and  thirty-one  thousand  five  hundred  and  fourteen  bushels, 
is  a  clear  gain  to  Mr.  A.,  without  any  production  on  his 
part. 

It  will  be  hereafter  shown  that  the  interest  may  be 
easily  reduced  to  one  per  cent,  or  to  any  other  per  cent 
that  shall  be  deemed  most  conducive  to  the  general  wel- 
fare ;  and  if  the  people  think  it  more  just  that  the  interest 
should  cease  to  accumulate  wealth  so  rapidly  into  a  few 
hands,  they  will  enact  laws  to  prevent  it.  If  they  will  stop 
such  accumulation  by  interest,  they  will  live  upon  the  pro- 
ducts of  their  own  labor,  instead  of  living  upon  the  charity 
of  capitalists.  If  in  twenty  years  Mr.  A.  should  bestow 
on  the  needy  $66,231,514,  or  the  same  number  of  bushels 
of  wheat,  it  would  be  an  unheard-of  liberality.  But 
if  the  law  of  interest  were  such  that  he  could  not 
legally  take  this  amount  from  the  people,  they  would  re- 
tain it  in  their  own  possession,  as  the  natural  product  of 
their  labor,  instead  of  being  compelled  to  receive  it  as  a 
charity. 


89 


Mr.  A.  now  uses  the  most  of  his  capital  by  investing  it 
in  State  and  other  stocks,  buying  business  notes  at  large 
discounts,  loaning  money  on  bond  and  mortgage,  buying 
up  mortgages  bearing  seven  per  cent  interest  below  their 
par  value,  purchasing  property  under  foreclosure,  &c. 
Doubtless  his  object  is  to  obtain  the  best  possible  per 
centage  income  for  the  use  of  his  money  or  property.  All 
that  he  gains  by  these  means  above  six  per  cent  interest, 
takes  a  still  greater  sum  from  the  earnings  of  producers. 

Now  suppose  from  this  time  forward  Mr.  A.  should  de- 
termine to  pursue  a  different  course,  and  to  lay  out  his 
capital  in  such  a  manner  as  to  conduce  in  the  highest  de- 
gree to  the  welfare  of  the  people  around  him.  To  support 
them  in  idleness  would  be  a  disadvantage  ;  but  to  employ 
them  and  pay  for  their  work  such  a  price  as  would  give 
them  a  good  subsistence,  and  furnish  them  with  the  means 
of  educating  their  children,  and  to  provide  for  the  aged 
and  needy,  would  be  a  very  benevolent  disposition  of  his 
property.  To  do  this  he  invests  all  his  property  in  the 
manufacture  of  cotton  goods.  With  thirty-three  and  a 
third  millions  of  dollars  he  could  carry  on  an  extensive 
business.  He  builds  his  manufactories,  and  purchases 
machinery.  He  contracts  with  a  number  of  planters  to 
supply  him  for  a  certain  number  of  years  with  a  given 
quantity  of  cotton.  He  also  contracts  with  workmen  to 
perform  the  labor  in  his  mills,  and  agrees  to  give  to  all 
such  prices  as  will  afford  tkem  and  their  families  a  com- 
fortable subsistence,  make  suitable  provision  for  the  edu- 
cation of  their  children,  and  support  those  who  are  unable 
to  work  and  dependent  upon  them.  The  cotton  will, 
of  course,  be  always  furnished  at  a  uniform  price,  and  the 

12 


90 


price  of  labor  will  be  about  the  same  each  year.  Mr. 
A.  now  fixes  the  prices  of  his  goods  so  as  to  sustain  the 
various  people  in  his  employment.  Let  Mr.  A.  invest  all 
his  means  in  mills,  in  stock,  and  labor,  on  these  terms, 
while  planters  hire  their  plantations,  and  the  mechanics, 
manufacturers  and  laborers  hire  houses  to  live  in,  &c., 
from  others,  while  employed  by  Mr.  A.,  and  it  will  be  im- 
possible for  him,  with  all  his  capital,  to  sustain  himself. 
In  a  very  few  years  he  will  become  bankrupt,  for  he  must 
enable  his  workmen  to  pay  their  rents,  and  give  them, 
beside,  a  comfortable  support.  This  obliges  him  to  use 
his  own  property  at  a  low  rate  of  interest,  while,  through 
his  workmen,  he  is  compelled  to  pay  a  high  rate  of  rent, 
or  interest,  for  the  use  of  the  property  of  others.  The 
operation  is,  virtually,  that  the  owner  of  thirty-three  and  a 
third  millions  of  dollars  borrows  an  equal  or  large  amount 
at  six,  seven,  or  eight  per  cent  interest,  and  re-loans  the 
borrowed  money,  together  with  his  own,  at  an  interest  of 
one,  or  one  and  a  quarter  per  cent.  By  so  doing,  hrs  for- 
tune will  soon  pass  into  the  hands  of  other  capitalists. 

The  present  monetary  laws  of  all  nations  are  opposed  to 
the  reward  of  labor ;  and  as  long  as  these  laws  exist,  no 
individual  or  national  attempts  justly  to  reward  it,  except 
by  a  change  of  these  laws,  can  secure  any  permanent 
success. 


SECTION  II. 

OF   THE   WEALTH   OF   CITIES,   AND   THE   MEANS   OF   ITS 
ACCUMULATION. 

The  following  illustration  shows  the  capability  of  money, 
at  an  interest  of  six  per  cent  per  annum,  to  concentrate 
the  wealth  of  nations  in  large  cities. 

Suppose  an  uncultivated  island,  ten  miles  square,  and  a 
few  miles  distant  from  the  coast  of  the  United  States. 
Ten  thousand  wealthy  citizens  of  the  States  intend  to  build 
a  city  upon  it.  These  citizens  are  worth  $150,000  each; 
in  the  aggregate,  $1,500,000,000.  The  legal  interest  on 
money  is  fixed  at  six  per  cent  per  annum.  For  .two  years 
previous  to  their  removal  to  the  island,  the  people  prepare 
upon  it  houses  for  themselves,  and  suitable  accommoda- 
tions for  merchants  and  mechanics.  Each  of  these  families 
expends  $3,000  yearly  for  its  support.  Each  family  being 
worth  $150,000,  the  interest  on  whichy  at  six  per  cent, 
would  be  $9,000,  each  has  an  income  of  $6,000  a  year, 
over  and  above  expenses.  They  expend  their  surplus  in- 
come for  two  years,  i.  e.,  $12,000  for  each  family;  in  the 
aggregate  $120,000,000,  in  making  improvements  on  the 
island.  They  dispose  of  their  property,  on  the  main  land, 
on  credit,  securing  it  by  bonds  and  mortgages,  State  stocks, 
or  otherwise,  so  that  they  ensure  an  interest  of  six  per 
cent  per  annum,  on  the  whole  amount  of  their  property, 
payable  half  yearly.  These  obligations  merely  represent 
the  value  of  the  property  they  leave  upon  the  mainland,  and 


92 


must  yield  an  income  from  the  products  of  the  land  and 
of  the  labor  of  the  purchasers.  The  annual  interest  on 
$1,500,000,000,  amounts  to  $90,000,000.  The  paper  ob- 
ligations held  by  the  creditors  legally  empower  them  to 
demand  an  interest  of  $90,000,000  in  specie.  The  mere 
giving  of  obligations  is  all  that  is  required  in  the  transfer 
of  property.  The  conversion  of  their  property  into  bonds 
arid  mortgages,  and  other  securities,  may  not  have  re- 
quired the  use  of  a  million  of  dollars  of  money.  But  the 
payment  of  both  principal  and  interest  must  be  made  in 
money. 

The  ten  thousand  families  contain,  on  an  average,  five 
persons  each,  making,  in  the  aggregate,  a  population  of 
fifty  thousand.  They  employ,  on  an  average,  three  do- 
mestics in  each  family,  increasing  the  population  to  eighty 
thousand.  The  yearly  expenses  of  each  family  amount  to 
$3,000 ;  or,  for  the  whole,  to  $30,000,000.  Hatters,  tailors, 
shoemakers,  cabinet-makers,  mechanics  of  every  sort  col- 
lect about  them  to  supply  -their  wants,  and  receive  the 
sums  which  they  expend  in  living.  More  than  fifty  thou- 
sand laborers  and  artisans  are  needed  to  supply  their 
wants.  In  a  few  years  the  concentration  of  capital  collects 
a  city  of  three  or  four  hundred  thousand  inhabitants. 
They  expend  $30,000,000  yearly,  and  draw  beside,  from 
the  people  of  the  main  land,  a  clear  income  of  $60,000,000 
a  year,  which  they  can  re-loan.  The  debtors  cannot  send 
the  $60,000,000  in  money,  and  are  therefore  obliged  to 
send  the  products  of  the  soil,  manufactured  articles,  &c., 
to  this  city  for  sale,  to  procure  money  to  meet  their  pay- 
ments of  interest.  The  city  soon  becomes  the  market- 
place of  the  nation,  and  engrosses  the  principal,  business. 


93 


The  people  are  astonished  at  its  wealth  and  prosperity, 
and  congratulate  themselves  on  having  so  fine  a  market 
for  their  products. 

In  the  course  of  a  century  or  two,  the  ten  thousand 
families  and  their  descendants  can,  if  they  choose,  without 
labor  on  their  part,  build  a  wall  around  their  city  as  high 
and  as  broad  as  the  walls  of  ancient  Babylon.  Meanwhile, 
the  people  upon  the  main  land  are  obliged  to  supply  all 
the  wants,  the  food,  clothing,  &c.,  not  only  of  the  ten 
thousand  families  and  their  descendants  who  do  no  work, 
but  also  of  the  laborers  employed  in  the  erection  of  the 
wall,  in  the  building  of  houses,  and  in  all  other  improve- 
ments. Producers  and  manufacturers  from  different  parts 
of  the  country  carry  their  goods  to  the  city,  and  the  citi- 
zens, after  selecting  the  choicest  for  their  own  use,  re-sell 
the  remainder  to  laborers,  who  are  only  able  to  purchase 
the  poorer  kinds.  If  an  account  were  kept  of  those  sold 
to  the  country,  it  would  be  found  that  they  were  minus 
nearly  the  whole  support  of  the  people  of  the  city.  Now 
what  compensation  is  received  by  the  people  of  the  main 
land  for  the  supplies  which  they  furnish  ?  The  citizens, 
indeed,  pay  money  for  the  supplies,  but  this  money  is  the 
interest  on  capital  loaned  to  the  people,  without  whose 
labor  it  would  have  been  useless.  It  is  in  this  manner, 
under  the  present  monetary  laws  of  the  United  States,  a 
few  wealthy  men  in  cities  engross  the  wealth  of  the 
country. 

If  the  interest  in  the  case  supposed  were  limited  to 
one  per  cent,  the  income  for  each  family  would  be  only 
$1,500,  or  one-half  of  what  they  each  year  expend;  con- 
sequently, they  must  either  labor  for  the  other  half,  or 


94 


take  a  portion  of  their  principal  each  year  for  their  sup- 
port. It  would,  therefore,  be  impossible  for  them  to  build 
or  support  such  a  city. 

The  ten  thousand  most  wealthy  men  in  the  United 
States  are  probably  worth,  on  an  average,  at  least  $300,000 
— in  the  aggregate  $3,000,000,000.  The  annual  interest 
on  this  sum  at  six  per  cent  would  be  $180,000,000.  If 
these  men  should  sell  their  property,  and  invest  the  pro- 
ceeds in  bonds  and  mortgages  bearing  six  per  cent  inter- 
est per  annum,  and  remove  from  the  country,  they  would 
impose  a  tribute  on  the  productive  industry  of  the  nation 
which  would  impoverish  it  for  ages.  It  is  doubtful  whether 
the  people  would  ever  be  able  to  pay  and  satisfy  the  in- 
terest and  principal  of  the  debt.  They  would  pay 
$180,000,000  of  their  products  yearly,  without  receiving 
any  equivalent.  And  yet,  without  the  labor  of  the  buy- 
ers or  borrowers,  the  property  would  be  useless ;  and  if  the 
owners  received  any  benefit  from  it,  they  would  be  obliged 
to  remain  and  cultivate  it  themselves.  Should  laws  be 
such,  that  ten  thousand  wealthy  men  leaving  their  country, 
could  impose  such  a  burden  upon  the  millions  left  behind  ? 
If  interest  were  reduced  to  one  per  cent,  and  the  ten  thou- 
sand men  should  sell  their  property,  leaving  the  proceeds 
on  interest  at  one  per  cent,  this  nation  would  pay  them 
$30,000,000  interest  annually.  And  this  would  be  quite 
enough  for  producers  to  pay  for  the  use  of  capital. 

To  show  conclusively  that  the  present  rates  of  interest 
are  the  cause  of  the  accumulation  of  wealth  in  cities,  we 
will  enter  at  length  into  a  calculation  which  each  can  test 
and  examine  for  himself. 

No  one  will  dispute,  that  in  the  city  of  New  York  there 


95 


are  several  hundred  families  whose  collective  wealth  is 
equal  to  $250,000  for  each  family.  For  our  illustration, 
however,  we  will  take  but  one  hundred  families,  and  sup- 
pose each  of  them  to  be  worth  equal  to  $250,000 — in  total, 
$25,000,000.  As  five  or  six  of  our  citizens  might  be 
pointed  out,  who  are,  in  the  aggregate,  worth  at  least 
double  the  sum  total,  this  calculation  is  a  moderate  one. 
Suppose  these  one  hundred  families  to  emigrate  to  some 
desirable  section  of  the  country,  and  settle  upon  two  hun- 
dred acres  of  land,  so  that  each  family  owns  two  acres. 
They  convert  all  their  property  into  money,  or  into  bonds 
and  mortgages  bearing  six  per  cent  interest,  the  lowest  le- 
gal rate  of  interest  in  any  State  of  the  Union.  Each  fam- 
ily expends  yearly  for  its  support  $3,000,  or  the  interest  at 
six  per  cent  on  $50,000.  This  sum  would  supply  each 
family  with  the  necessaries  and  luxuries  of  life,  without 
the  performance  of  labor  by  any  of  its  members.  Besides 
the  $50,000  of  which  they  expend  the  income,  each  family 
has  $200,000,  in  the  aggregate,  $20,000,000,  loaned  at  six 
per  cent  interest,  the  annual  income  of  which  would  be 
$1,200,000.  The  yearly  expenditure  of  $300,000  (the  in- 
terest on  $50,000  for  each  family)  soon  collects  near  them 
merchants,  mechanics,  laborers,  and  others,  to  supply  their 
wants ;  and  farmers  find  here  a  market  for  their  produce. 
These  families  and  their  posterity  live  without  labor,  be- 
ing determined  to  incur  no  hazard  of  business.  They  in- 
termarry for  five  generations,  thirty  years  being  the 
average  duration  of  each.  Upon  marriage,  each  couple 
receives  $50,000,  the  income  on  which,  at  six  per  cent, 
amounting  to  $3,000  a  year,  is  appropriated  to  their  sup- 
port. They  also  receive  their  average  proportion  of  the 


96 

principal.  They  are  forbidden  to  exact  a  higher  rate  of 
interest  than  six  per  cent  per.  annum,  payable-  half-yearly ; 
and  are  not  at  liberty  to  call  in  the  principal  so  long  as 
the  interest  upon  it  is  regularly  paid.  The  families  consist 
of  five  persons  each,  exclusive  of  servants,  amounting,  in 
the  aggregate,  to  five  hundred  individuals.  Suppose  them 
to  increase  twenty-five  per  cent  every  twelve  and  a  half 
years.  Each  family  at  the  emigration  had  $200,000 
loaned  at  six  per  cent  interest,  amounting  to  $12,000  per 
annum ;  and,  in  the  aggregate,  on  the  $20,000,000  owned 
by  all,  to  $1,200,000  per  annum.  This  interest,  collected 
and  re-loaned  half-yearly,  will  double  the  principal, 
$20,000,000,  in  about  eleven  and  three-quarter  years ; 
but,  to  leave  time  for  the  collection  and  re-investment  of 
the  interest,  allow  it  twelve  and  a  half  years  to  double. 
The  following  calculations  exhibit  the  sum  which  would 
be  owned  by  the  families  at  the  end  of  five  generations  of 
thirty  years  each,  or  at  the  end  of  one  hundred  and  fifty 
years.  This  calculation  of  the  accumulation  of  wealth  by 
interest  is  no  idle  theory,  but  a  mathematical  demonstra- 
tion of  facts,  based  upon  the  lowest  rate  of  interest  estab- 
lished by  law  in  any  State— a  much  lower  rate,  too,  than 
the  average  one  at  which  money  is  actually  loaned. 

The  following  table  exhibits  the  accumulation  at  the 
rate,  and  under  the  circumstances,  as  above : — 

TABLE 

OP  THE  INCREASE  AT  SIX  PER  CENT  OF  THE  WEALTH  OF  A  HUNDRED  FAMILIES  WORTH  $250,000 
EACH,  DURING  A  PERIOD  OF  ONE  HUNDRED  AND  FIFTY  YEARS,  WITH  A  DEDUCTION  OF  THEIR 
ANNUAL  EXPENSES. 

100  families  worth  $250,000  each t $25,000,000 

Yearly  expenses  of  each  family,  $3,000,  or  the  income  on  $50,000  at  six 
per  cent— total  for  100  families 5,000,000 

Deduct  $5,000,000  for  expenses,  and  there  are  left  to  accumulate 20.000,000 

. 

* 


97 


The  interest  at  six  per  cent  paid  half  yearly,  and  re-loaned,  will  equal  the 
principal  in  llf  years;  but  allow  12$  years,  and  then  add  


40,000,000 
Add  25  per  cent  increase  to  100  families  in  12$  years — i.  e.,  25  families, 

and  deduct  $50,600  for  the  support  of  each  of  the  25 1,250,000 


Left  to  accumulate 38,750,000 

Add  12$  years' interest,  at  6  per  cent 38,750,000 


77,500,000 
Add  25  per  cent  increase  to  125  families — i.  e,,  31  families,  and  deduct 

$50,000  for  each  of  the  31 1,550,000 


Left  to  accumulate 75,950,000 

Add  12$  years'  interest  at  6  per  cent 75,950,000 


150,900,000 

Add  25  per  cent  to  156  families— i.  e.,  39  families,  and  deduct  $50,000 
for  eachof  the  39 1,950,000 


Left  to  accumulate 149,950,000 

Add  12$  years'  interest  at  6  per  cent 149,950,000 


299,900,000 

Add  25  per  cent  to  195  families — i.  e.,  49  families,  and  deduct  $50,000 
for  each  of  the  49 ' 2,450,000 


Left  to  accumulate 297,450,000 

Add  12$  years'  interest  at  6  per  cent 297,450,000 


594,900,000 

Add  25  per  cent  to  244  families— i.  e.,  61  families,  and  deduct  $50,000 
for  each  of  the  61 3,050,000 


Left  to  accumulate 591,850,000 

Add  12$  years'  interest  at  6  per  cent 591,850,000 


1,183,700,000 

Add  25  per  cent  to  305  families— i.  e.,  76  families,  and  deduct  $50,000 
for  each  of  the  76 3,800,000 


Left  to  accumulate 1,179,900,000 

Add  12$  years'  interest  at  6  percent 1,179,900,000 

2,359,800,000 

Add  25  per  cent  to  381  families — i.  e.,  95  families,  and  deduct  $50,000 
for  each  of  the  95 4,750,000 

Left  to  accumulate 2,355,050,000 

Add  12$  years'  interest  at  6  per  cent 2,355,050,000 


4,710,100,000 
Add  25  per  cent  to  476  families— i.  e.,  119  families,  and  deduct  $50,000 

for  each  of  the  119 5,950,000 


Left  to  accumulate 4,704,150,000 

Add  12$  years'  interest  at  6  per  cent - 4,704,150,000 

12  9,408,300,000 


98 

• 

Add  25  per  cent  to  595  families— i.  e.,  149  families,  aftd  deduct  $50,000 
for  each  of  the  149 $7,450,000 


Left  to  accumulate 9,400,850,000 

Add  12£  years'  interest  at  6  per  cent ,....    9,400,850,000 


18,801,700,000 
Add  25  per  cent  to  744  families— i.  e.,  186  families,  and  deduct  $50,000 

for  each  of  the  186 9,300,000 



Left  to  accumulate 18,792,400,000 

Add  12$  years'  interest  at  6  per  cent.^ 18,792,400,000 

37,584,800,000 
Add  25  per  cent  to  930  families— i.  e.,  233  families,  and  deduct  $50,000 

for  each  of  the  233 11,650,000 


Left  to  accumulate 37,573,150,000 

Add  12$  years'  interest  at  6  per  cent 37,573,150,000 


75,146,300,000 
Add   25^per    cent  to  1,163  families — i.  e.,  291  families,  and  deduct 

$50,000  for  each  of  the  291 14,550;000 


Left  to  accumulate $75,131,750,000 


Add  the  two  hundred  and  ninety-one  families  to  the 
eleven  hundred  and  sixty-three,  and  their  sum  is  a  thou- 
sand four  hundred  and  fifty-four.  One  hundred  families, 
by  the  addition  of  twenty-five  per  cent  every  twelve  and 
a  half  years,  increase  to  a  thousand  four  hundred  and  fifty- 
four  families.  The  calculation  is  continued  for  a  hundred 
and  fifty  years,  or  for  five  generations  of  thirty  years  each. 
The  sum  of  $50,000  is  assigned  to  each  family,  which, 
loaned  at  six  per  cent,  secures  to  each  a  yearly  income  of 
$3,000.  Each  family  has  an  income  of  ten  dollars  per  day 
for  three  hundred  days  in  the  year.  If  each  family  av- 
erage five  individuals,  each  man,  woman,  and  child,  re- 
ceives an  income  of  two  dollars  per  day.  This  is  twice  as 
much  as  a  laborer  can  earn  in  a  day,  and  the  single  dollar 
must  support  both  himself  and  his  family.  Beside  this 
yearly  income,  the  people  of  this  nation  would  Owe  the 
fourteen  hundred  and  fifty-four  families  $75,131,750,000, 


99 

,  .      * 
Suppose  this  sum  to  be  equally  divided  among  the  families, 

each  would  have  $51,672,455.  The  interest  upon  the  sum 
total,  at  the  rate  of  six  per  cent,  would  amount  to  more 
than  $4,500,000,000  annually.  An  immense  amount  of 
the  products  of  labor  must  be  yearly  sold  for  money  to 
pay  this  interest. 

Is  the  law  which  thus  accumulates  interest  or  products, 
a  power  for  actual  production  ?  No — the  law  which  ex- 
acts this  interest  does  not  increase  the  quantity  of  money, 
nor  of  products ;  it  simply  compels  the  sale  of  the  pro- 
ducts of  labor  for  its  payment.  It  requires  that  the  pro- 
ceeds of  $4,500,000,000  worth  of  products  shall  be  given 
over  to  the  fourteen  hundred  and  fifty-four  families  to 
satisfy  the  interest.  More  than  half  the  present  valuation 
of  the  whole  property  of  the  United  States,  both  real  and 
personal,  would  be  required  to  pay  the  interest  for  one 
year.  And  yet  these  families  exact  less  than  our  laws 
permit,  for  they  take  but  six  per  cent  interest,  and  in 
a  number  of  our  states,  the  legal  rate  is  seven  or  eight 
per  cent. 

Now  let  one  per  cent  be  the  legal  rate  of  interest ;  and 
suppose  the  families  to  loan  the  twenty  millions  for  the 
same  period  of  a  hundred  and  fifty  years  at  one  per  cent, 
instead  of  at  six  per  cent,  and  to  collect  and  re-loan  the 
interest  half  yearly.  The  people  have  the  same  amount 
of  money  to  use  ;  and  at  the  expiration  of  the  hundred  and 
fifty  years,  the  sum  of  the  principal  and  interest  does  not 
exceed  $90,000,000,  while  at  six  per  cent  it  amounts  to 
$75,131,750,000.  At  one  per  cent,  the  principal  and  the 
interest  do  not  amount  to  one  eight-hundredth  part  as 
much  as  at  six  per  cent,  nor  does  the  sum  require  one 


100 


eight-hundredth  part  as  much  labor  to  pay  it.  If  the 
people  borrow  the  money  at  six  per  cent,  at  the  end  of  six 
months  they  take  back  a  portion  of  the  borrowed  money 
to  pay  the  interest.  The  interest  is  re-loaned  to  the 
people,  and  so  continually  increases  their  indebtedness. 
With  interest  at  one  per  cent,  the  people  would  have  the 
same  quantity  of  money,  and  at  the  end  of  six  months 
would  take  back  a  half  per  cent,  to  pay  the  interest,  and 
the  families  would  re-loan  the  half  per  cent  to  the  people, 
instead  of  re-loaning  the  three  per  cent.  A  high  rate  of 
interest  cannot  increase  the  quantity  of  money,  but  it  in- 
creases the  indebtedness  of  the  people. 

If  interest  were  at  one  per  cent,  each  of  the  one  hun- 
dred families  would  have  but  $2,500  income  on  its  whole 
capital ;  and  if  each  should  continue  to  expend  $3,000  a 
year,  each  family,  in  order  not  to  encroach  on  its 
original  capital,  would  have  to  produce,  by  its  labor, 
$500  worth  of  products  yearly  for  its  own  use,  or  for 
sale,  instead  of  being  able  to  lay  up  $12,000  yearly,  with- 
out labor.  The  producing  classes  could  never  be  op- 
pressed by  the  capital  of  these  families.  But  with  interest 
at  six  per  cent,  in  less  than  a  century  and  a  half,  the  whole 
nation  would  be  subject  to  their  control,  besides  being 
obliged  to  support  them  and  their  posterity  in  idleness  du- 
ring the  hundred  and  fifty  years. 


101 


SECTION  III. 

OP    THE    INTEREST    RECEIVED    BY    THE    CITIZENS   OF    THE 
CITY  OF  NEW  YORK  ON  LOANS  TO  THE  COUNTRY. 

Doubtless  the  city  of  New  York  has  at  this  time  more 
than  $50,000,000,  and  probably  more  than  $100,000,000 
loaned  in  various  ways  to  the  country  at  six  or  seven  per 
cent  interest  Some  part  of  it  is  invested  in  State  bonds, 
bank  and  railroad  stocks,  stocks  of  manufacturing  compa- 
nies, &c. ;  and  some  loaned  on  bond  and  mortgage,  the  divi- 
dends or  interest  on  all  of  which  must  be  paid  in  New 
York.  Estimate  this  sum  at  only  $25,000,000,  and  allow 
it  to  draw  seven  per  cent  interest  Suppose  the  citizens 
to  support  themselves  independently  of  the  income  from 
this  loan,  and  allow  it  to  accumulate  by  collecting  and  re- 
loaning  the  interest  half  yearly,  for  a  century.  It  matters 
not  in  what  way  the  capital  may  be  loaned,  producers  are 
compelled  to  add  all  the  interest  from  the  proceeds  of  their 
products.  In  ten  years  and  one  month,  the  $25,000,000 
will  increase  to  $50,000,000 ;  in  twenty  years  and  two 
months,  to  $100,000,000;  in  thirty  years  and  three 
months,  to  $200,000,000 ;  in  forty  years  and  four  months, 
to  $400,000,000 ;  in  fifty  years  and  five  months,  to 
$800,000,000;  in  sixty  years  and  six  months,  to 
$1,000,000,000;  in  seventy  years  and  seven  months,  to 
$3,200,000,000;  in  eighty  years  and  eight  months,  to 
$6,400,000,000;  in  ninety  years  and  nine  months,  to 
$12,800,000,000;  and,  in  one  hundred  years  and  ten 
months,  to  $25,600,000,000.  This  is  as  certain  as  any 


calculation,  and  nothing  can  prevent 
the  accumulation  of  enormous  sums  in  the  hands  of  a  few 
capitalists  in  this  city,  unless  it  be  the  inability  of  the  in- 
habitants of  the  country  to  pay  the  interest  on  their  loans. 
This  rate  of  interest  compels  farmers  to  give  the  value  of 
one  farm  every  ten  years  for  the  use  of  another ;  the  ten- 
ant of  each  manufactory  to  give  the  value  of  another  man- 
ufactory, once  in  the  same  period,  for  the  use  of  the  one 
occupied ;  and  the  passengers  and  transporters  upon  each 
railroad  and  canal,  to  pay  a  sufficient  fare  or  freight  to 
construct,  at  the  expiration  of  that  period,  another  railroad 
or  canal.  It  is  manifest  that  the  producing  classes  are 
unable  to  fulfil  such  requirements.  Each  additional  rail- 
road and  canal  is  added  to  the  original  one  by  the  pro- 
ducing classes,  and  is  given  to  the  capitalist  without  labor 
or  production  on  his  part.  He  gains  them  by  the  legal 
power  of  money  to  accumulate,  which  is  equally  great, 
whether  the  money  be  loaned  on  interest  or  invested  in 
property.  If  farmers,  manufacturers,  mechanics,  and 
merchants,  were  compelled  to  earn  only  what  themselves 
require,  they  could  devote  the  labor  now  expended  in  the 
support  of  non-producers,  to  the  supply  of  general  com- 
forts and  conveniences. 

Large  cities  accumulate  the  wealth  of  nations  without 
earning  it.  According  to  the  State  Register,  in  1845,  the 
city  of  New  York  contained  a  population  of  371,233,  and 
the  State  of  New  York  contained  a  population  of 
2,604,495.  The  population  of  the  city  is  less  than  one- 
seventh  part  of  that  of  the  State.  And  yet  the  assessed 
valuation  of  the  real  and  personal  property  of  the  city  at 
that  period,  was  $239,995,517,  while  all  the  other  prop- 


103 

«rty  in  the  State  was  valued  at  only  $365,650,574.  This 
estimate  is  made  without  including  Brooklyn  and  Wil- 
liamsburgh,  which  are,  in  fact,  parts  of  the  city  of  New 
York,- as  they  have  grown  up  and  are  sustained  by  the  busi- 
ness of  the  city.  Taking  the  city  of  New  York  alone,  it 
appears  that  the  value  of  its  property  is  more  than  two- 
fifths  of  the  value  of  the  property  of  the  State,  while  its 
population  is  less  than  one-seventh  of  that  of  the  State. 
But  it 'is  doubtless  true  that  its  citizens  are  worth  more  than 
all  the  other  inhabitants  of  the  State.  The  citizens  of  the 
city  own  large  tracts  of  land  in  different  parts  of  the  State, 
and  these  lands  are  taxed  in  the  counties  in  which  they 
are  located.  If  these  taxes  were  estimated  as  being  paid 
in  the  city,  where  the  property  is  owned,  and  were  taken 
from  the  taxes  of  the  country,  the  transfer  of  taxes  on  the 
amount  of  $62,827,530,  would  make  the  valuation  of  the 
property  of  the  city  equal  one-half  the  property  of  the  - 
whole  State.  The  citizens  of  the  city  of  New  York  own 
large  tracts  of  land  in  other  States,  which  are  taxed  in 
those  States.  They  have  also  a  large  amount  of  money 
loaned  to  the  country  on  bond  and  mortgage,  and  large 
amounts  invested  in  United  States,  State,  and  bank  stocks, 
and  in  stocks  of  manufacturing  and  railroad  companies, 
&c.,  in  various  States,  all  of  which  property,  if  taxed,  is 
estimated  and  taxed  as  belonging  to  the. country.  There 
are  doubtless  many  loans  of  money  and  much  personal 
property,  which,  although  loaned  and  used  in  the  city, 
escape  any  taxation.  The  people  of  other  parts  of  the 
State  own  a  considerable  amount  of  property,  stocks,  &c., 
in  the  city ;  but  the  amount  owned  by  them  in  the  city  is 
very  small,  compared  with  the  amount  cwned  by  the  citi- 


104 


zens  of  the  city  in  the  country — probably  not  one-twen- 
tieth. It  is  reasonable  to  conclude  that  the  inhabitants  of 
the  city  and  county  of  New  York  own  as  much,  or  even 
more  property,  than  all  the  people  in  all  the  other  fifty- 
eight  counties  in  the  State.  Does  any  one  suppose  that 
the  citizens  of  the  city  of  New  York  earn  more  by  their 
labor  than  all  the  rest  of  the  inhabitants  of  the  State  ?  Do 
they  do  more  toward  supplying  the  people  of  the  State 
with  food,  clothing,  building  materials,  &c.,  than  the  peo- 
ple of  the  State  do  toward  supplying  them  with  these 
things  ?  If  they  do  not,  they  should  not  continue  to  accu- 
mulate so  great  a  proportion  of  the  wealth. 

The  means  of  arriving  at  the  truth  in  relation  to  this, 
would  be  to  take  an  exact  account  of  all  the  products 
which  are  sent  out  of  the  city,  and  see  if  the  products 
that  leave  the  city  are  increased  above,  or  diminished  be- 
low the  products  that  are  sent  from  the  country  into  the 
city.  If  the  money  be  taken  into  the  account,  the  interest 
and  dividends  on  both  sides  should  be  excluded.  Allow- 
ance should  be  made  for  the  labor  performed  in  exchang- 
ing goods,  in  shipments,  &c.,  in  the  city,  equal  to  the  al- 
lowance for  the  same  amount  of  labor  on  a  farm,  so  that 
the  population  of  the  city  should  be  fairly  compensated  for 
their  labor.  If  it  be  found  that  the  371,233  citizens 
of  the  city  do  mot  perform  one-half  the  labor  for  the 
2,604,495  inhabitants  of  the  State,  and  yet  obtain  more 
than  one-half  the  whole  property,  it  is  evident  that  the 
distribution  has  been  unjust.  Our  producers  are  contin- 
ually endeavoring  to  overcome  their  poverty  by  their  in- 
dustry, but  while  our  present  rates  of  interest  prevail, 
capital  will  continue  to  take  their  surplus  earnings,  and 
leave  them  poor. 


105 


SECTION  IV. 

THE  PER  CENTAGE  ACTUAL  INCREASE  OF  THE  VALUE  OF 
THE  PROPERTY  OF  THE  STATES  OF  NEW  YORK  AND  MAS- 
SACHUSETTS, COMPARED  WITH  THE  PER  CENTAGE  LEGAL 
INCREASE  ON  THE  PROPERTY  OF  THESE  STATES  FOR  THE 
SAME  PERIODS. 

The  State  of  New  York  is  deemed  very  prosperous, 
and  thought  to  be  rapidly  increasing  in  wealth  by  its  in- 
dustry and  enterprise.  The  following  table,  taken  from 
the  New  York  State  Register  for  1846,  will  exhibit  the 
actual  gain  of  the  people  of  the  State  for  ten  years,  viz, 
from  1835  to  1845,  according  to  the  assessed  value  of  the 

property : — 

TABLE 

OF  REAL    AND  PERSONAL   ESTATE  IN  THE    STATE  OF    NEW   YORK,  AS  TAKEN   FROM    THE   STATE 

REGISTER  FOR  1846. 

Corrected  aggregate 
Real  estate.  Personal  estate.  valuation. 

1835 $403,166,094  $128,526,103  $530,653,524 

1836 539,756,874  132,615,613     

1837 498,430,054  122,021,033     

1838 502,864,006  124,680,778     

1839 519,058,782  131,602,988     

1840 517,723,170  121,447,%30     

1841 531,987,886  123,311,644     

1842 504,254,029  116,595,233     

1843 476,999,430  118,602,064     

1844 480,027,609  119,612,343     

1845 486,490,121  115,988,895  605,646,095 


$74,992,571 

The  table  shows  that  in  1835,  the  whole  valuation 
of  the  taxed  real  and  personal  estate  in  the  State  of 
New  York,  was  $530,653,524 ;  and  that  in  1845,  it  had 
increased  to  $605,646,095.  In  the  ten  years,  the  people  of 
the  State  added  to  their  wealth  $74,992,571 — equal  to 
$7,499,257  a  year,  or  a  fraction  over  one  and  four-tenths 
per  cent  a  year  on  the  capital  employed.  This  calculation 


106 


is  made  without  any  payment  of  interest  until  the  expira- 
tion of  the  ten  years. 

Taking  the  above  as  a  fair  valuation  of  the  property, 
the  people  of  the  State  added  only  about  one  and  four- 
tenths  per  cent  per  annum  to  their  capital,  and  the  legal 
interest  of  the  State  is  seven  per  cent,  and  is  usually  paid 
oftener  than  yearly.  If  the  people  had  rented  the  State 
of  a  foreign  nation,  and  at  the  end  of  every  six  months  we 
had  taken  up  our  obligations  and  added  in  the  six  months' 
interest,  at  the  end  of  the  ten  years  we  should  have  added 
to  the  principal  over  $524,000,000.  We  should  have 
owed  the  foreign  nation,  in  interest  or  rent,  a  sum  seven 
times  greater  than  all  that  we  earned  above  our  own  sup- 
port. If  we  earned  only  $74,992,571  more  than  our  own 
support,  how  could  we  return  the  property  to  its  owners, 
and  pay  them  $524,000,000  of  rent,  or  seven  times  more 
than  our  labor  would  produce  ?  Yet  the  laws  of  the  State, 
fixing  the  interest  at  seven  per  cent,  make  a  requisition 
equal  to  this  upon  laborers  in  favor  of  capital. 

The  average  of  the  yea^y  loans  of  the  banks  in  the  State  of  New  York,  ac- 
cording to  their  own  reports,  amounts  to .' $70,000,000 

According  to  the  annual  report,  the  debt  of  the  State  on  the  30th  Septem- 
ber, 1846 24,734,080 

Debts  of  the  principal  cities  in  the  State  in  1845,  as  taken  from  the  State 
Register : —  I 

City  of  New  York $14,476,986 

"     Brooklyn 545,000 

"     Albany 500,000 

"     Troy -. 772,000 

"     Rochester 108,000 

«'     Buffalo 57,131 

16,459,117 


$111,193,197 

The  interest  on  this  sum  at  7  per  cent  per  annum 7,783,523 

Yearly  average  of  the  surplus  earnings  of  the  people  of  the  State,  according 
to  the  assessed  valuation  of  the  property,  from  1835  to  1845 7,499,257 


i  ftawjf*  i 

$284,266 


107 


It  appears  that  the  interest  on  these  debts  alone,  at 
seven  per  cent,  would  amount  to  $284,266  more  than  the 
surplus  earnings  of  all  the  people  in  the  State,  and  this 
too  without  compounding  the  interest.  It  must  be  borne 
in  mind,  that  this  debt  of  $111,193,197  is  contracted  for 
money  borrowed  by  the  people,  or  by  the  State,  and  the 
interest  paid  upon  it  goes  into  the  hands  of  a  few  capital- 
ists, who  furnish  the  capital  for  banking,  and  lend  the 
money  to  the  State  and  its  incorporated  cities.  All  the 
debts  contracted  by  the  sale  of  lands,  agricultural  pro- 
ducts and  merchandise — all  the  money  loaned  by  individ- 
uals on  bond  and  mortgage,  and  all  business  debts,  bearing 
interest,  are  additional  to  the  reported  debts.  The  debts 
yearly  contracted  in  the  State  by  sales  of  land,  merchandise, 
&c.,  amount  to  several  hundred  millions  of  dollars,  and  two, 
three,  or  four  hundred  millions  bear  interest.  Must  not  the 
payment  of  so  great  an  amount  of  interest,  by  producers, 
concentrate  the  wealth  of  the  State  in  the  hands  of  a  few 
capitalists,  and  continue  more  and  more  to  oppress  produ- 
cers ?  We  might  as  well  expect  by  labor  to  dam  up  the 
mouths  of  the  rivers  of  our  continent,  so  that  they  could 
not  empty  into  the  ocean,  as  to  expect,  by  labor,  to  contend 
successfully  against  the  power  of  capital,  even  at  two  and 
a  half  per  cent  interest,  and  much  less  against  six  or 
seven  per  cent.  An  interest  of  even  two  and  a  half  per 
cent  per  annum,  on  capital,  would  as  certainly  break 
down  productive  industry,  and  accumulate  the  wealth  in 
favor  of  capital,  as  the  waters  of  the  rivers  would  certainly 
break  down  the  dams,  and  force  their  waters  and  the  ob- 
structing dams  into  the  ocean. 

According  to  the  assessed  valuation  of  the  property  of 


108 

* 

the  State  of  New  York,  the  increase  of  its  wealth  from 
1835  to  1845  was  about  one  and  four-tenths  per  cent  per 
annum,  without  compounding  the  interest.  This  was  a 
period  of  only  ten  years.  It  is  probable  that,  in  1835, 
property  was  estimated  higher  in  proportion  to  its  actual 
worth  than  in  1845.  This  statement,  then,  would  not  be 
an  exactly  fair  criterion  of  the  actual  increase  of  wealth  in 
the  State.  During  that  period,  according  to  it,  we  gained, 
beside  our  own  support,  only  a  fraction  over  one  per  cent 
a  year  by  all  our  labor.  If  this  was  a  correct  estimate, 
the  per  centage  we  gained  in  wealth  was  only  three-fourths 
as  great  as  our  per  centage  increase  in  population,  for, 
during  the  ten  years,  our  population  increased  from 
2,174,517  to  2,604,495,  or  a  fraction  less  than  two  per 
cent  a  year.  This  calculation  would  make  the  aggregate 
wealth  of  the  State  in  proportion  to  its  population  less  in 
1845  than  it  was  in  1835;  and  this,  I  presume,  was  not 
the  fact.  Still  there  is  little  doubt  that  at  least  one-half 
the  people  of  the  State  were  poorer  in  1845,  and  are  now 
poorer,  than  they  were  in  1835.  The  increased  wealth  is 
accumulated  in  fewer  hands.  More  and  more  of  the 
earnings  of  the  producing  classes  are  required  to  pay  the 
yearly  rent,  or  interest,  on  the  yearly  increasing  capital. 
If  the  men  who  are  now  rich  had  in  1835  an  income  that 
abundantly  supplied  their  wants,  an  increase  of  wealth  has 
not  added  to  their  happiness ;  and  the  increase  has  been 
taken  from  those  who  toil,  and  yet  are  suffering  for  the 
necessaries  of  life.  Without  improving  the  condition  of 
the  rich,  we  are  continually  doing  a  wrong  to  a  large 
class  of  industrious  and  worthy  citizens. 


109 


An  estimate  of  the  increase  of  wealth  in  the  State  of 
Massachusetts,  for  fifty  years,  is  contained  in  an  article  in 
the  May  number,  for  1847,  of  that  deservedly  celebrated 
periodical,  Hunt's  Merchants'  Magazine.  A  few  extracts 
are  made  to  show  the  difference  between  the  amount  of 
property  produced  by  the  labor  of  Massachusetts  during 
fifty  years,  and  the  amount  which  would  have  accumulated 
upon  the  capital  employed  during  that  period  at  six  per 
cent  interest. 

"  It  is  the  object  of  this  article  to  exhibit  the  progress 
of  wealth  in  Massachusetts  during  the  fifty  years,  from 
1790  to  1840,  as  deduced  from  the  six  State  Valuations, 
taken  at  intervals  of  ten  years  each.  These  valuations 
have  the  legislative  sanction  of  the  General  Court,  and  are 
the  bases  of  apportionment  of  all  State  taxation  for  the  ten 
years  following.  They  are  prepared  from  the  returns 
furnished  by  the  assessors  of  the  several  towns  and  dis- 
tricts, and  are  intended  to  embrace  all  the  taxable  prop- 
erty of  the  Commonwealth.  They  may  be  relied  upon 
as  sufficiently  correct  for  the  purposes  of  comparison,  or 
of  showing  the  progress  of  wealth  during  these  fifty  years ; 
at  least  they  furnish  the  nearest  approximation  we  have  to 
the  true  amount  of  wealth  in  the  State." 

The  assessors'  valuation  of  the  property  in  the  State  of 
Massachusetts  in  1790,  was  $44,024,349,  and  in  1840,  it 
had  increased  to  $299,880,338.  The  increase  of  wealth 
in  the  State  during  fifty  years  was  $255,855,989.  In  Massa- 
chusetts the  legal  rate  of  interest  is  six  per  cent  per  annum, 
and  the  value  of  property  is  commonly  estimated  by  the 
per  centage  income  for  which  it  can  be  rented.  If  a  house 
and  lot,  or  a  store  and  lot,  will  rent  for  $600  per  annum, 


110 

beside  the  taxes  and  insurance,  the  property  is  valued  at 
$10,000,  for  the  income  from  it  is  equal  to  interest  at  six 
per  cent  per  annum  on  $10,000. 

In  Massachusetts,  the  banks  are  allowed  to  discount 
paper  at  six  per  cent.  In  making  loans,  they  take  the 
interest  or  discount  from  the  notes  for  the  time  they  have 
to  run.  Take  the  value  of  the  property  in  1790,  say 
$44,024,349,  and  suppose  it  to  have  been  loaned  at  six 
per  cent  per  annum,  on  notes  having  six  months  to  run. 
In  fifty  years  the  interest  on  this  sum  would  have  ac- 
cumulated to  $885,524,246.  Add  the  principal — i.  e., 
$44,024,349,  and  we  have  a  sum  of  $929,548,595.  The 
actual  increase  of  wealth  in  the  State  during  the  fifty 
years,  was  but  $255,855,989.  Add  to  this  the  principal  or 
property  of  the  State  in  1790— i.  e.,  $44,024,349,  and  the 
entire  wealth  of  the  State  amounts  to  $299,880,338 ;  or 
not  one-third  as  much  as  the  accumulation  on  the  same 
capital  would  have  been  in  fifty  years  at  six  per  cent  in- 
terest per  annum.  If,  in  1790,  thg  people  of  Massachusetts 
had  rented  their  property  of  a  foreign  nation,  and  agreed  to 
pay  interest  on  it  half  yearly  at  the  rate  of  six  per  cent 
per  annum,  they  would  have  been  bound  to  pay  in  the 
fifty  years,  about  three  and  a  half  times  more  than  they 
earned  during  that  period  over  and  above  their  living. 
The  results  of  the  establishment  of  this  rate  of  interest  in 
the  State,  are  manifest  in  the  accumulation  of  wealth  in 
the  hands  of  the  few,  and  in  the  proportionate  destitution 
of  the  many. 

According  to  a  pamphlet  containing  a  list  of  the  wealthy 
men  of  Boston,  and  an  estimate  of  the  value  of  their  prop- 
erty, there  are  224  individuals  who  are  worth,  in  the  aggre- 


Ill 


gate,  $71,855,000.  According  to  this  estimate,  the  224  men 
would  be  worth,  on  an  average,  $321,781  each.  In  this 
pamphlet,  no  estimate  is  made  of  any  individual's  prop- 
erty that  is  supposed  to  amount  to  less  than  $100,000. 
If  we  take  the  wealthy  men  in  all  the  other  towns  and 
counties  in  the  State,  and  suppose  that  there  are  3,000 
other  individuals  who  are  worth  only  $30,000  each,  their 
aggregate  wealth  would  amount  to  $90,000,000.  Add  this 
sum  to  the  $71,855,000  owned  by  the  224  men,  and  we 
have  $161,855,000,  or  considerably  more  than  half  the  - 
value  of  all  the  property  of  the  State.  Such  estimates  are 
liable  to  be  more  or  less  incorrect ;  but  any  one  who  will 
make  an  estimate  of  the  wealth  of  the  town  or  village  in 
which  he  resides,  will  find  that  a  very  small  proportion  of 
the  inhabitants  are  worth  more  than  all  the  rest.  This  is 
still  more  true  with  regard  to  large  cities,  than  it  is  to 
towns  and  villages. 

If  the  estimate  of  the  wealth  of  the  3,224  wealthy  men 
in  the  State  of  Massachusetts  be  correct,  these  men  are 
worth  more  than  all  the  other  inhabitants  of  the  State. 
Allowing  the  families  of  the  3,224  men  to  average  five 
persons  each,  they  would  constitute  a  population  of 
16,120  individuals.  In  1840,  the  State  contained  a  popu- 
lation of  737,700.  The  16,120  individuals  would  not 
be  two  and  one-fifth  per  cent  of  the  population,  and 
yet  they  would  own  more  than  half  the  wealth  of 
the  State.  If  this  estimate  even  approach  the  truth, 
it  shows  an  immense  disproportion  of  wealth  for  the 
labor  performed  by  itsi  owners;  for  it  is  impossible 
that  they,  or  their  ancestors,  whatever  may  have  been 
their  skill  or  industry,  can  have  performed  the  labor  and 


112 


made  the  improvements  which  constitute  this  wealth. 
The  interest  on  money  loaned,  and  the  rent  on  property 
leased,  are  the  only  means  by  which  they  could  have  ac- 
cumulated it.  $44,024,349  loaned  on  six  months'  pa- 
per at  six  per  cent  interest  per  annum,  as  interest  is 
taken  by  banks,  would  increase  in  fifty  years  to  twenty- 
one  times  its  original  amount.  This  increase  would  ac- 
crue to  the  lenders  of  the  money,  by  merely  exchanging 
their  money,  or  bank-notes,  for  the  notes  of  individuals,  and 
collecting  the  interest. 

If  the  rate  of  interest  on  money  in  Massachusetts  were 
at  one  per  cent  per  annum,  instead  of  at  six  per  cent,  arid 
the  $44,024,349  were  loaned  on  six  months'  paper  at  one 
per  cent  interest  in  advance,  in  fifty  years  the  money 
would  accumulate  $28,879,973.  Add  the  principal — i.  e., 
$44,024,349,  and  the  sum  would  be  $72,904,322,  instead 
of  $929,548,595,  the  accumulation  at  six  per  cent. 


SECTION  V. 

FOREIGN  DEBTS. 


Interest  on  money  at  six  per  cent  per  annum,  payable 
half  yearly,  will  double  the  principal  in  eleven  years,  eight 
months,  and  twenty  days ;  but  for  convenience,  we  will 
call  it  twelve  years.  One  thousand  dollars  loaned  at  six 
per  cent,  in  twelve  years,  will  accumulate  to  $2,000 ;  in 
twenty-four  years,  to  $4,000;  in  tfeirty-six  years,  to  $8,000; 
in  forty-eight  years,  to  $16,000 ;  in  sixty  years,  to  $32,000 ; 
in  seventy-two  years,  to  $64,000 ;  in  eighty-four  years,  to 


113 


$128,000;  in  ninety-six  years,  to  $256,000;  in  a  hundred 
and  eight  years,  to  $512,000;  in  one  hundred  and  twenty 
years,  to  $1,024,000.  Multiply  this  sum  by  1,024,  and  it 
will  give  the  accumulation  for  one  hundred  and  twenty 
years  more ;  $1,024,000  x  1,024  =  $1,048,576,000.  Mul- 
tiply this  product  by  1,024,  and  we  shall  have  the  accu- 
mulation during  the  next  one  hundred  and  twenty  years, 
or  for  a  period  of  three  hundred  and  sixty  years — 
$1,048,576,000  X  1,024=  $1,073,741,824,000. 

A  rate  of  interest  on  money  at  one  per  cent,  payable 
half  yearly,  will  double  the  principal  in  about  sixty-nine 
and  a  half  years ;  but  for  convenience,  we  will  call  it 
seventy  years.  One  thousand  dollars  loaned  at  one  per 
cent,  in  seventy  years  will  accumulate  to  $2,000 ;  in  a  hun- 
dred and  forty  years,  to  $4,000 ;  in  two  hundred  and  ten 
years,  to  $8,000 ;  in  two  hundred  and  eighty  years,  to 
$16,000;  in  three  hundred  and  fifty  years,  to  $32,000;  or 
in  three  hundred  and  sixty  years  to,  say,  $37,574. 

Deduct  $37,574  from  the  accumulation  on  $1,000  at  six 
per  cent,  during  the  three  hundred  and  sixty  years — i.  e., 
$37,574  from  $1,073,741,824,000,  and  the  remainder  is 
$1,073,741,786,426;  which  sum,  a  rate  of  interest  of  six 
per  cent  on  $1,000  will  accumulate  over  and  above  the 
sum  accumulated  by  a  rate  of  interest  of  one  per  cent  on 
the  same  sum  during  a  period  of  three  hundred  and  sixty 
years.  One  dollar  loaned  at  six  per  cent  per  annum,  the 
interest  collected  and  re-loaned  half  yearly  for  a  period 
of  three  hundred  and  sixty  years,  will  accumulate  the  sum 
of  $1,073,741,824;  while  the  same  dollar  loaned  atone 
per  cent,  and  the  interest  collected  and  re-loaned  in  the 
same  manner  for  the  same  period,  will  accumulate  little 

15 


114 


more  than  $37.  One  dollar  loaned  at  six  per  cent  interest 
per  annum  for  a  period  of  three  hundred  and  sixty  years, 
would  accumulate  more  than  double  the  assessed  value  of 
the  whole  State  of  New  York.  The  legal  interest  in  the 
State  of  New  York  is  seven  per  cent,  and  one  dollar  loaned 
at  this  rate  for  three  hundred  and  sixty  years,  would  ac- 
cumulate a  greater  sum  than  the  valuation  of  the  whole 
United  States. 

Suppose  a  foreign  nation  should  lend  to  the  government 
of  the  United  States  $100,000  at  seven  per  cent,  on  con- 
dition that  our  government  should  give  her  bonds  half 
yearly  for  the  payment  of  the  interest,  and  the  sum  should 
accumulate  for  a  term  of  three  hundred  and  sixty  years. 
However  prosperous  our  people  might  be,  at  the  expira- 
tion of  the  period,  the  whole  property  of  the  nation  would 
not  pay  the  debt.  At  seven  per  cent  interest,  the  debt 
would  double  in  about  ten  years.  In  three  hundred  and 
sixty  years,  $100,000  loaned  at  seven  per  cent  interest  per 
annum,  would  amount  to  $6,971,947,673,600,000 ;  a  much 
larger  sum  than  the  valuation  of  the  property  of  the  whole 
world.  These  calculations  make  it  evident  that  six  and 
seven  per  cent  interest  cannot,  and  ought  not,  to  be  paid 
by  any  nation. 

We  will  make  a  calculation  of  interest  at  three  per 
cent  per  annum,  paid  and  re-loaned  half  yearly,  as  in  the 
former  calculations.  If  the  United  States  should  borrow 
from  England  $100,000  at  three  per  cent  interest,  take  up 
her  bonds  every  six  months,  and  give  new  bonds,  adding 
in  the  interest,  the  debt  would  be  doubled  in  about  twenty- 
three  and  a  half  years.  But  allow  it  to  double  in  twenty- 
four  years,  and  the  $100,000  would  accumulate  in  three 


115 


hundred  and  sixty  years,  to  $3,276,800,000.  The  annual 
interest  on  this  sum  at  three  per  cent  would  be  $08,304,000. 
The  yearly  payment  of  this  sum  of  interest  would  be 
caused  by  merely  borrowing  $100,000  for  a  period  of 
three  hundred  and  sixty  years  at  three  per  cent  per  annum, 
adding  the  interest  to  the  principal  every  six  months. 
This  enormous  debt  would  be  occasioned  by  the  accumu- 
lative^power  of  interest,  which  it  requires  the  products  of 
labor  to  satisfy  and  pay. 

Suppose,  when  Virginia  was  settled  in  1607,  England 
had  sold  to  the  first  settlers  the  whole  of  the  United  States 
for  $1,000,  and  had  taken  a  mortgage  for  this  sum  cover- 
mg  the  whole  property.  Instead  of  paying  the  interest 
yearly  at  seven  per  cent,  the  settlers  agree  to  take  up  their 
bonds  at  the  end  of  every  six  months,  and  add  in  the  in- 
terest. Allow  the  Si, 000  and  the  accruing  interest  to  re- 
main outstanding  until  1850,  and  then  become  due.  Al- 
though the  prosperity  of  the  nation  has  far  surpassed  that 
of  any  other,  yet  its  property  of  every  description  would 
not  pay  the  debt.  The  interest  would  double  the  principal 
in  ten  years  and  one  month.  In  one  hundred  years  and 
ten  months,  the  debt  would  amount  to  $1,024,000  ;  and  in 
two  hundred  and  one  years  and  eight  months,  to 
$1,048,576,000.  Add  forty  years  and  four  months,  to 
1849,  and  the  sum  would  amount  to  $16,777,216,000. 

All  the  interest  which  would  have  accumulated  upon 
the  $1,000  would  not  have  increased  the  quantity  of 
money  or  the  property  of  the  nation.  All  the  increase  of 
the  value  of  the  property  would  have  been  added  by  the 
labor  of  the  people ;  but  all  their  surplus  earnings  have 


116 


not  equalled  the  legal  accumulation  at  seven  per  cent  in- 
terest on  $1,000  during  this  period. 

The  Southern  and  Western  States  depend  upon  the 
yearly  products  of  their  labor  for  their  wealth ;  they  are 
greatly  impoverished  by  the  amount  of  interest  that  they 
are  compelled  to  pay  to  our  Eastern  and  Northern  cities 
for  the  use  of  money.  A  very  large  amount  of  the  capital 
stocks  of  Western  and  Southern  banks,  and  a  large  atnount 
of  Western  and  Southern  State  bonds,  are  owned  by  cap- 
italists in  the  Northern  cities,  or  by  foreigners.  The  in- 
terest on  these  is  constantly  transferring  the  earnings  of 
the  people  of  these  States  to  a  few  capitalists  in  the  large 
cities,  or  in  foreign  nations.  All  this  would  be  avoided  by 
the  establishment  of  proper  monetary  laws  in  our  own 
nation.  The  government  should  furnish  money  by  making 
a  representative  of  the  property  of  applicants  in  their  own 
States,  and  no  State  should  be  compelled  to  pay  to  other 
States  or  nations  millions  of  dollars'  worth  of  products 
yearly  for  a  representative  of  their  property. 


SECTION  VI. 

NO  ACCUMULATION  OF  PROPERTY  BY  LABOR  EQUAL  TO 
THE  ACCUMULATION  BY  THE  LOAN  OF  MONEY  AT  SEVEN 
PER  CENT  INTEREST. 

Although  the  business  of  a  nation  be  conducted  in  good 
faith,  and  all  contracts  be  fulfilled  according  to  law,  and 
no  scarcity  of  money  be  induced,  yet  a  legal  rate  of  in- 
terest at  seven  per  cent  per  annum,  will  inevitably  con- 
centrate the  wealth  of  a  nation  in  a  few  hands. 

To  show  that  interest  at  seven  per  cent  will  accumulate 
property  far  more  rapidly  than  it  can  be  earned  by  labor, 
suppose  a  nation  of  one  thousand  individuals.  This  min- 
iature nation  is  used  in  illustration,  because  the  operation 
of  the  laws  will  be  more  readily  seen  upon  so  small  a  com- 
munity ;  but  the  effects  would  be  similar  upon  a  great  na- 
tion. The  thousand  persons  settle  in  a  new  country,  and 
engage  in  various  occupations,  agricultural,  manufacturing, 
mercantile,  &c.  At  the  settlement  of  the  colony,  we  will 
suppose  the  colonists  to  be  worth  an  equal  amount  of 
property,  so  that  one  shall  possess  no  superiority  over  an- 
other. Each  pursues  some  lawful  and  useful  business, 
without  entering  into  any  speculation  whereby  a  fortune 
may  be  gained  without  labor.  No  one  has  any  means  of 
support  beside  actual  production,  except  the  legal  interest 
of  seven  per  cent  on  money  loaned,  or  rent  at  the  same 
rate  on  money  invested  in  property.  All  are  diligent  in 


118 


their  several  occupations,  and  thus  each  contributes  to  the 
general  well-being. 

Two  mechanics,  just  come  of  age,  are  desirous  of  accu- 
mulating large  fortunes.  They  are  good  workmen,  and 
each  is  able  to  earn  a  dollar  a  day  over  and  above  his  ex- 
penses. Every  six  months  they  loan  the  money  thus 
earned  at  seven  per  cent  interest,  the  interest  payable  half 
yearly.  They  set  their  affections  upon  being  rich,  and 
therefore  do  not  burden  themselves  with  a  house  and 
family.  These  men  earn  an  average  of  a  dollar  a  day,  be- 
side their  expenses,  three  hundred  days  in  eajch  year,  du- 
ring forty  years  and  four  months.  Their  age  is  then  six- 
ty-one years  and  four  months.  Each  earns  by  labor 
$300  per  year  for  forty  years,  or,  for  the  whole  period, 
$12,120 — together,  $24,200.  The  interest  on  their  earn- 
ings, loaned  half  yearly,  for  a  period  of  forty  years  and 
four  months,  accumulates  an  amount  which  will  be  seen 
by  reference  to  the  following  table.  Interest  at  seven  per 
cent  per  annum,  paid  and  re-loaned  half  yearly,  accumu- 
lates a  sum  equal  to  the  principal  in  ten  years  and  one 
month* 


119 


TABLE. 

INTEREST  AT  SEVEN  PER  CENT  ON  $300. 


1st  half  year  they  earn  by  their 

labor $300  00 

6  months'  interest  at  7  per  cent..        10  50 

310  50 
2d  half  year's  labor 300  00 


6  months'  interest. 


610  50 
21  37 


631  87 
3d  half  year's  labor 300  00 


6  months'  interest. 


931  87 
32  61 


964  48 
4th  half  year's  labor 300  00 


6  months'  interest. 


1,264  48 
44  26 


1,308  74 
5th  half  year's  labor 300  00 


6  months'  interest. 


1,608  74 
56  30 


1,665  04 

6th  half  year's  labor 300  00 

1,965  04 

6  months' interest 68  78 

2,033  82 

7th  half  year's  labor 300  00 


2,333  82 

81  68 


2,415  50 


6  months'  interest 

8th  half  year's  labor 300  00 

6  months'  interest... 


2,715  50 
95  04 


2,810  54 

9th  half  year's  labor 300  00 

3,110  54 

6  months'  interest 108  87 


3,219  41 
10th  half  year's  labor 300  00 

3,519  41 
6  months'  interest 123  18 


3,642  59 
llth  half  year's  labor 30000 

3,942  59 


Amount  brought  up 3,942  59 

6  months'  interest 137  99 


4,080  58 
12th  half  year's  labor 300  00 


4,380  58 
6  months'  interest 153  32 

4,533  90 
13th  half  year's  labor 300  00 

4,833  90 
6  months'  interest 169  18 


5,003  08 
14th  half  year's  labor 300  00 


5,303  08 
6  months' interest 185  61 


5,488  69 
15th  half  year's  labor 300  00 


5,788  69 
6  months' interest 202  60 


5,991  29 
16th  half  year's  labor 300  00 

6,291  29 
6  months' interest 220  20 


6,511  49 
17th  half  year's  labor 300  00 

6,811  49 
6  months' interest 238  40 


18th  half  year's  labor. 


7,049  89 
300  00 


7,349  89 
months'  interest 257  25 


7,607  14 
19th  half  year's  labor 300  00 

7,907  14 
6  months'  interest 276  75 

8,183  89 
20th  half  year's  labor 300  00 


6  months'  interest. 


8,483  89 
49  49 


8,533  38 
Add  one  month's  labor....  50  00 


$8,583  38 


120 


In  the  first  ten  years  and  one  month,  the  two  men  earn  by  their  labor:....        $6,050  00 
Interest  thereon  during  this  period « 2,533  38 


8,583  38% 

In  the  2d  ten  years  and  one  month,  the  interest  on  this  sum  equals  the 
principal 8,583  38 


17,166  76 
2d  10  years  and  1  month's  labor,  and  interest  thereon 8,583  38 


25,750  14 
3d  "  interest , <~.N       25,75014 


51,500  28 
3d  "  labor,  and  interest  thereon 8,58338 


60,083  66 
4th  "  interest 60,083  66 


;'.;  120,167  32 

4th  "  labor,  and  interest  thereon 8,58338 


128,750  70 
In  40  years  and  4  months,  the  men  earn  by  their  labor 24,200  00 


Remainder  accumulated  by  interest $104,550  70 

The  interest  on  the  sum,  $24,200,  earned  by  their  la- 
bor is  $104,550  70 — more  than  four  and  a  quarter  times 
more  than  they  have  earned  by  their  labor.  Suppose  the 
two  men  to  live  twenty  years  and  two  months  longer — that 
is,  to  the  age  of  eighty-one  years  and  six  months,  and  con- 
tinue to  loan  their  money.  During  this  period  it  would 
double  twice. 

Thus $128,750  70 

10  years  and  one  month's  interest 128,750  70 

257,501  40 
2d  10  years  and  1  month's  interest 257,501  40 

Total  accumulation  in  60  years  and  6  months $515,002  80 

The  two  men  do  not  labor  during  the  last  20  years  and  2  months,  and  ex- 
pend for  their  living  during  that  period 15,002  80 


500,000  00 
In  40  years  and  4  months,  they  earn  by  their  labor  $24,000,  and  live  20 

years  and  2  months  on  their  money  without  labor. 
Subtract  money  earned  by  labor 24,200  00 


Remainder  accumulated  by  interest  on  $24,200 $475,800  00 


121 

Every  dollar  of  the  $475,800  is  earned  by  the  labor  of 
others  and  given  to  the  two  men,  as  the  legal  interest  upon 
$24,200.  These  men  live  laboriously,  and  work  for  a  very 
moderate  compensation.  They  take  only  the  legal  rate  of 
interest,  and  do  not  demand  the  principal  of  the  money  as 
long  as  the  interest  is  paid.  Neither  do  they  enter  into 
any  speculations.  It  is,  therefore,  said,  that  labor  earns 
their  large  fortunes.  Cases  similar  to  this  are  often  brought 
to  prove  that  an  industrious  man  may,  by  his  labor,  accu- 
mulate a  large  property.  That  such  conclusion  is  erro- 
neous, is  manifest  from  the  foregoing  table,  by  which  it  ap- 
pears, that  more  than  nineteen  out  of  twenty  parts  of 
the  large  fortunes  of  these  men  are  earned  by  others,  and 
paid  to  them  to  satisfy  the  legal  interest  on  their  loans  of 
money. 

Now  let  us  suppose  the  interest  on  money  to  be  one  per 
cent,  and,  with  this  difference  only,  these  two  men  to  be 
placed  in  the  same  circumstances  in  which  they  have  been 
already  described.  They  earn  over  and  above  their  ex- 
penses a  dollar  a  day,  three  hundred  days  in  each  year, 
during  a  period  of  forty  years  and  four  months.  They 
loan  their  earnings  at  the  legal  rate  of  interest,  (one  per 
cent,)  and  collect  and  re-loan  the  interest  half  yearly 


122 

TABLE. 

INTEREST  AT  1  PER  CENT  ON  $300. 


6  months'  interest  at  1  psr  cent  .  . 

1  50 

16  92 

2d  half  year's  labor    

301  50 
300  00 

12th  half  year's  labor  

3,400  67 
300  00 

6  months'  interest               ..  .  .... 

601  50 
3  01 

6  months'  interest  

3,700  67 
18  50 

3d  half  year's  labor       

604  51 
300  00 

13th  half  year's  labor  

3,719  17 
300  00 

904  51 
4  52 

6  months'  interest  

4,019  17 
20  10 

909  03 
300  00 

14th  half  year's  labor      . 

4,039  27 
..  .     300  00 

6  months'  interest               .      .  .  « 

1,209  03 
6  05 

4,339  27 
21  69 

5th  half  year's  labor     

1,215  08 

300  00 

15th  half  year's  labor  

4,360  96 
.......     300  00 

6  months'  interest       .      ..   .  .... 

1,515  08 

7  58 

6  months'  interest  

4,660  79 
23  30 

I 

6th  half  year's  labor  

1,522  66 
.     300  00 

16th  half  year's  labor  

4,684  26 
300  00 

6  months'  interest             

1,822  66 
9  11 

6  months'  interest 

4,984  26 
24  92 

7th  half  year's  labor        . 

1,831  77 
300  00 

17th  half  year's  labor 

5,009  18 
300  00 

6  months'  interest      

2,131  77 
10  66 

6'months'  interest  

5,309  18 
26  55 

8th  half  year's  labor       .       .     . 

2,142  43 
300  00 

18th  half  year's  labor. 

5,335  73 

300  00 

2,442  43 
12  21 

6  months'  interest  

5,635  73 
28  18 

* 
9th  half  year's  labor  

2,454  64 
.     300  00 

19th  half  year's  labor 

5,663  91 
.     300  00 

6  months'  interest  

2,754  64 
13  77 

5,963  91 
29  82 

10th  half  year's  labor    

2,768  41 
.     300  00 

20th  half  year's  labor     

5,993  73 
300  00 

6  months'  interest       .        ...... 

3,068  41 
15  34 

1  month's  interest        

6,293  73 
5  27 

1  1th  half  year's  labor  

3,083  75 

300  00 

1  month's  labor    •  •        • 

6,299  00 
50  00 

3,383  75 

$6.349 

123 


In  the  first  ten  years  and  one  month,  the  two  men  would  earn  by  their  labor 

the  same  sum  as  in  the  former  case,  viz: $6,050  00 

Interest  during  that  period  at  J  per  cent  on  the  money  earned 299  00 


6,349  00 
2d  ten  years  and  one  month's  interest  at  1  per  cent,  re -loaned  half  yearly...          671  73 

7,020  73 
2d  ten  years  and  one  month's  Jabor,  with  interest  thereon  at  1  per  cent 6,349  00 

13,369  73 
3d  ten  years  and  one  month's  interest  at  1  per  cent 1,414  53 

14,784  26 
3d  ten  years  and  one  month's  labor,  with  interest  thereon 6,349  00 

21,133  26 
4th  ten  years  and  one  month's  interest  at  1  per  cent 2,235  87 

23,369  13 
4th  ten  years  and  one  month's  labor,  with  interest  thereon 6,349  00 

$29,718  13 


Jn  the  above  forty  years  and  four  months,  the  two  men  earn  by  their  labor  the 

same  sum  as  when  interest  was  at  7  per  cent,  viz : $24,200  00 

Interest  at  one  per  cent  upon  this  sum  during  a  period  of  forty-four  years  and 
four  months 5,518  13 

$29,718  13 

Interest  on  this  sum  at  1  per  cent  for  twenty  years  and  two  months,  or  until 
.    the  men  arrive  at  the  age  of  eighty-one  years  and  six  months — first  ten 

years  and  one  month's  interest 3,144  17 

32^62  30 

2d  ten  years  and  1  month's  interest 3,475  80 

Total  amount  of  earnings,  and  interest  thereon  at  1  per  cent  for  sixty  years    

and  six  months 36,338  10 

As  in  the  former  case,  suppose  the  men  to  live  the  last  twenty  years  and  two 

months  of  their  lives  upon  their  money,  and  deduct  for  their  expenses 1 4,995  00 

$21,343  10 

With  interest  at  seven  per  cent,  at  the  age  of  eighty- 
one  years  and  six  months,  they  have  a  fortune  of  $500,000, 
while  with  interest  at  one  per  cent,  they  have  but  $21  343, 
making  a  difference  of  $478,656.  If  in  the  former  case 
they  decease  at  the  age  of  eighty-one  years  and  six 
months,  their  fellow-citizens  are  indebted  to  their  estates 
or  heirs,  $500,000,  wjth  an  annual  interest  of  $35,000 ; 


124 


and  in  the  latter,  the  citizens  are  indebted  to  them  $21,343 
with  an  annual  interest  of  $213  44.     Even  at  one  per  cent, 
the  interest  legally  accumulates  for  them  more  than  one- 
half  as  much  as  they  earn  by  labor. 

Let  us  now  suppose  another  case,  of  two  men  who  be- 
come of  age  at  the  same  time  as  the  former  two,  and  who 
are  equally  good  workmen.  They  l^ewise  earn  a  dollar 
per  day  over  and  above  their  own  support ;  but  they 
marry,  and  have  the  expense  of  supporting  their  families. 
Each  rents  a  house  at  $100  per  annum;  and  thus  one- 
third  of  their  surplus  earnings  is  paid  for  tenements. 
Their  earnings  must  also  supply  their  families  with  food, 
clothing,  fuel,  &c.  Although  these  two  men  work  as  dili- 
gently and  as  skilfully,  and  earn  as  much  as  the  former 
two,  yet,  instead  of  being  able  to  lend  money  upon  inter- 
est, they  are  obliged  to  pay  interest  on  the  houses  they 
occupy.  Strict  economy  is  requisite  to  make  one  dollar 
a  day,  over  and  above  their  personal  expenses,  school  their 
children,  pay  rent,  and  furnish  necessary  supplies.  These 
two  men  labor  as  much  as  the  former  two,  and  contribute 
at  least  an  equal  share  to  the  public  good.  All  their  earn- 
ings are  devoted  to  the  payment  of  artisans,  teachers  and 
others,  whose  services  they  require.  The  former  two, 
without  performing  more  labor  than  the  latter  two,  live 
twenty  years  and  two  months  without  labor,  and  leave  for- 
tunes to  the  amount  of  $250,000  each.  The  latter  work 
as  long  as  they  are  able,  but  in  old  age  are,  perhaps,  com- 
pelled to  seek  an  asylum  in  the  poor-house. 

If  the  two  men  as  they  earned  their  money  had  invested 
it  in  farming  land,  or  in  houses  and  stores,  and  had  rented 
the  property  at  seven  per  cent  on  its  cost,  instead  of  lend- 


125 

ing  their  money  at  seven  per  cent  interest,  they  certainly 
could  not  have  oppressed  the  producing  classes  more  than 
they  would  by  lending  them  money  at  seven  per  cent.  In 
either  case  they  would  compel  others  to  earn  for  them 
more  than  nineteen  out  of  twenty  parts  of  their  fortunes. 
The  amount  to  which  nations  and  individuals  are  in- 
debted, is  a  subject  of  general  complaint.  The  above  il- 
lustration exhibits  the  cause.  The  difference  of  the 
amount  due  to  the  estates  of  these  men,  under  the  sup- 
posed circumstances,  can  be  traced  directly  to  the  differ- 
ence in  the  rate  of  interest.  At  the  rate  of  seven  per 
cent,  a  sum  of  $500,000  is  due  to  their  estates.  It  would 
take  the  labor  of  a  single  man  for  more  than  1,666  years 
to  pay  this  principal ;  and  it  would  require,  at  one  dollar 
per  day,  the  constant  toil  of  more  than  116  men  to  pay  the 
yearly  interest  of  $35,000.  From  generation  to  generation, 
these  men  might  continue  to  pay  the  interest,  and  still 
the  burden  be  undiminished ;  and  in  the  short  space  of 
sixty  years  and  six  months,  two  men  entail  this  debt  upon 
this  small  nation.  Not  the  labor  of  these  two  men  entails 
this  evil,  but  the  law  which  fixes  the  unjust  rate  of  inter- 
est. It  is  the  natural  result  of  the  law,  and  must  be  alike 
disastrous  to  large  and  small  communities. 


126 


SECTION  VII. 

TWO     PER     CENT    PER   ANNUM    TOO    HIGH   A   RATE   OF 
INTEREST. 

However  fertile  a  country  may  be,  interest  even  at  two 
per  cent  per  annum  will  inevitably  oppress  the  producers. 
In  the  following  table,  interest  is  calculated  at  two  per 
cent,  under  the  same  circumstances  and  for  the  same  peri- 
od as  in  the  former  cases.  The  interest  will  be  found  far 
to  exceed  the  principal. 

TABLE. 

INTEREST  AT  TWO  PER  CENT  ON  $300 


6  months'  interest  at  2  per  cent* 

3  00 

7th  half  year's  labor        . 

300  00 

2d  half  year's  labor  '.. 

303  00 

300  00 

2,164  06 
21  64 

6  months'  interest     

603  00 
6  03 

8th  half  year's  labor  . 

2,185  70 
300  00 

3d  half  year's  labor       

609  03 

300  00 

2,485  70 
24  86 

6  months'  interest     

909  03 
9  09 

9th  half  year's  labor 

2,510  5(J 
300  00 

4th  half  year's  labor  

918  12 

300  00 

6  months'  interest 

2,810  .%' 
28  11 

6  months'  interest     »«•»»••          . 

1,218  12 
12  18 

1  0  th  half  year's  labor     .  ,  . 

2,838  67 

300  00 

5th  half  year's  labor  

1,230  30 
300  00 

3,138  67 
31  39 

6  months'  interest  . 

1,530  30 
15  30 

1  1  th  half  year's  labor  .... 

3,170  06 
300  00 

6th  half  year's  labor 

1,545  60 
300  00 

3,470  00 
34  70 

6  months'  interest 

1,845  60 
18  46 

1  2th  half  year's  labor 

3,504  76 
300  00 

1,864  06 

3,804  76 

127 


Amount  brought  up 3,804  76 

6  months' interest 38  05 


3,842  81 

13th  half  year's  labor -..      300  00 

4,142  81 
6  months' interest 41  43 


4,184  24 
14th  half  year's  labor 300  00 

4,484  24 


6  months' interest 44  84 

4,529  08 
15th  half  year's  labor 300  00 


4,829  08 
6  months' interest ,       48  29 

4,877  37 
16th  half  year's  labor 30000 

5,177  37 


6  months' interest 51  77 

5,229  14 
17th  half  year's  laboi 300  00 


5,529  14 
55  29 


5,584  43 


6  months'  interest 

18th  half  year's  labor 300  00 

6  months'  interest 


5,884  43 


58  84 
5,943  27 


Amount  brought  up 5,943  27 

19th  half  year's  labor 300  00 

6,243  27 
6  months'  interest 62  43 

6.305  70 
20th  half  year's  labor 300  00 


Add  1  month's  interest.. 


Add  1  month's  labor. 


6,605  70 
11  06 

6,616  76 
50  00 

6,666  76 
Add  10  years  and  1  month's  in- 
terest at  2  per  cent 1,481  55 

8,148  31 
2d  10  years  and  1  month's  labor 

and  interest 6,666  76 


14,815  07 
10  years  and  1  month's  interest .    3,292  35 

18,107  42 
3d  10  years  and  1  month's  labor 

and  interest 6,666  76 

24,774  18 
10  years  and  1  month's  interest.    5,505  88 

30,280  06 
4th  10  years  and  I  month's  labor 

and  interest 6,666  7G 

$36,946  82 


Add  the  interest  at  two  per  cent  for  twenty  years  and  two  months  longer,  until 

the  men  reach  the  age  of  eighty-one  years  and  six  months. 
1st  10  years  and  1  month's  interest 8,210 


45,157  51 
2d  10  years  and  1  month's  interest 10,035  35 


55,192  86 


In  forty  years  and  four  months  the  two  men  earn  by  their  labor 24,204  00 

The  interest  upon  this  sum  for  a  period  of  sixty  years  and  six  months,  even  at 
two  per  cent,  amounts  to ^ 30,992  00 


This  is  $6,790  more  than  they  earn  by  their  labor. 


$55,192  00 


When  it  is  considered  that  this  interest  or  rent  is  paid 
for  the  mere  use  of  money  or  of  capital,  every  reflecting, 
honest  mind  must  be  convinced  that  two  per  cent  is  a 


128 


higher  rate  of  interest  than  a  nation  or  people  can  afford 
to  pay.  It  is  surely  most  unreasonable  for  the  laws  to 
compel  producers  to  pay  for  the  use  of  the  property  which 
a  man  may  acquire  by  forty  or  fifty  years'  labor,  twice  or 
thrice  the  sum  of  the  property  so  earned.  The  thing  pro- 
duced is  more  highly  estimated  than  the  power  that  pro- 
duces it.  If  an  interest  of  two  per  cent  upon  a  well 
regulated  currency  would  accumulate  the  property  of  a 
nation  in  the  possession  of  a  few,  can  it  be  considered 
strange  that  the  rates  of  three,  four,  five,  six,  and  seven, 
and  even  higher  rates  which  are  exacted  in  different  coun- 
tries should  have  concentrated  property  into  so  few 
hands  ?  The  only  wonder  is,  that  producers  have  con- 
tinued to  live  under  this  oppression. 

A  rate  of  interest  of  even  two  per  cent  per  annum,  would 
put  it  out  of  the  power  of  a  people  to  fulfil  their  contracts. 
The  establishment  of  this  rate  of  interest  would  be  equiva- 
lent to  the  passing  of  a  law,  compelling  the  laboring  classes 
to  double  the  capital  of  a  nation,  in  favor  of  the  capitalists 
once  in  thirty-four  and  a  half  years,  besides  producing 
their  own  support.  Suppose  a  foreign  nation  owned  all 
the  real  and  personal  estate  in  this  nation,  and  a  fair  esti- 
mate were  made  of  the  value  of  all ;  and  then  our  people 
were  legally  obliged  to  pay  two  per  cent  yearly  upon  this 
valuation,  beside  producing  for  their  own  support ;  would 
not  a  tribute  or  tax  like  this  keep  us  for  ever  in  poverty  ? 
Our  laws  enforce  much  higher  rates  of  interest  on  capital, 
which  are  little  less  oppressive  to  the  great  body  of  our 
producers,  because  they  are  paid  to  a  few  capitalists  in 
our  own  land  instead  of  to  foreigners. 

It  may  be  objected  that  some  of  the  illustrations  of  the 
accumulative  power  of  interest  are  based  on  so  long  periods 


129 


as  to  present  exaggerated  results :  but  it  must  be  borne  in 
mind  that  the  rates  of  interest,  or  rents,  are  continually  ac- 
cruing to  the  capital  of  nations,  and  producing  similar  evil 
effects  upon  the  people  whether  for  longer  or  shorter 
periods. 

SECTION  VIII. 

THE  REDUCTION  OF  INTEREST  WOULD  BE  AN  EQUAL  BENE- 
FIT TO  THE  PRODUCING  CLASSES,  WHETHER  PROPERTY 
SHOULD  RISE,  OR  FALL  IN  PRICE,  IN  CONSEQUENCE  OF 
SUCH  REDUCTION. 

It  may  be  supposed  that  if  interest  were  reduced  to  one 
per  cent,  property  and  labor  would  rise  in  the  same  pro- 
portion, and  therefore,  the  producing  classes  would  receive 
no  advantage  from  the  reduction.  But  whether  property 
should  rise,  or  fall,  or  maintain  its  present  price,  producers 
would  have  the  same  relative  advantage ;  their  gain  would 
be  from  the  lessened  per  centage  on  capital.  If  a  man  bor- 
rowed a  hundred  dollars  for  a  year,  he  would  pay  but  one 
dollar  for  the  use  of  one  hundred,  instead  of  paying  seven 
dollars.  If  he  hired  a  hundred  acres  of  land,  he  would  have 
to  earn  only  one  acre  to  pay  for  the  use  of  one  hundred, 
instead  of  being  obliged  to  earn  seven  to  pay  for  their  use  ; 
for  the  per  centage  on  money  governs  the  rent  of  land. 
This  principle  of  the  adequate  reward  of  labor,  by  the  de- 
crease of  interest  on  money,  although  property  and  labor 
in  consequence  should  rise  in  price,  will  be  illustrated  by 
the  following  table.  The  price  of  labor  is  calculated  at  six 
dollars  per  day,  and  the  interest  on  money  at  one  per  cent 
per  annum.  The  men  earn  their  money,  and  loan  it  as  in 
the  former  cases. 


130 


TABLE 

INTEREST  AT  ONE  PER  CENT — LABOR  AT 


PER  DAY. 


6  months'  interest  at  1  per  cent 

9  00 

6  months'  interest 

101  51 

2d  half  year's  labor  

1,809  00 
1,800  00 

12th  half  year's  labor  

20,404  10 
1,800  00 

3,609  00' 
18  04 

22,204  10 
Ill  02 

3d  half  year's  labor 

3,627  04 
1  800  00 

13th  half  year's  labor 

22,315  12 
1,^00  00 

6  months'  interest 

5,427  04 
27  14 

6  months'  interest 

24,115  12 
120  58 

4th  half  year's  labor       

5,454  18 
1,800  00 

14th  half  year's  labor  

24,235  70 
....      1,800  00 

7,254  18 
36  27 

6  months'  interest 

26,035  70 
130  18 

5th  half  year's  labor    

7,290  45 
1,800  00 

15th  half  year's  labor  

26,165  88 
1,800  00 

6  months'  interest        .        . 

9,090  45 
45  45 

6  months'  interest  

27,965  88 
139  88 

6th  half  year's  labor 

9,135  90 
1,800  00 

16th  half  year's  labor 

28,105  76 
1  800  00 

6  months'  interest 

10,935  90 
54  68 

6  months'  interest 

29,905  76 
149  53 

7th  half  year's  labor  

10,990  58 
1,800  00 

30,055  29 
1,800  00 

6  months'  interest 

12,790  58 
63  95 

6  months'  interest 

31,855  29 

159  28 

8th  half  year's  labor  

12,854  53 
1,800  00 

18th  half  year's  labor  

32,014  57 
1,800  00 

6  month's  interest  

14,654  53 
73  27 

6  months'  interest  

33,814  57 
169  07 

9th  half  year's  labor 

14,727  80 
1,800  00 

19th  half  year's  labor 

33,983  64 

1,800  00 

16,527  80 
82  64 

6  months'  interest  

35,783  64 
178  92 

10th  half  year's  labor  

16,610  44 
1,800  00 

20th  half  year's  labor  

35,962  56 
1,800  00 

6  months'  interest  

18,410  44 
'••-'•  92  05 

1  month's  interest  

37,762  56 
31  47 

llth  half  year's  labor 

18,502  59 
1  800  00 

1  month's  labor     •      .  .  •« 

37,794  03 
300  00 

20,302  59 

$38,094  03 

131 


1st  10  years  and  1  month's  interest $38,094  03 

2d  10  years  and  1  month's  interest...... 4,030  44 


42,124  47 
10  years  and  1  month's  labor  and  interest »... , 38,094  03 


80,218  50 
3d  10  years  and  1  month's  interest 8,487  24 


88,705  74 
10  years  and  1  month's  labor  and  interest , 38,094  03 


126,799  77 
4th  10  years  and  1  month's  interest 13,415  34 


140,215  11 
10  years  and  1  month's  labor  and  interest 38,094  03 


$178,309  14 


In  40  years  and  4  months,  the  two  men  earn  at  $6  per  day $145,200  00 

Interest  thereon  for  40  years  and  4  months  at  1  per  cent 33,109  14 


178,309  14 

Let  the  interest  on  $178,309  14  accumulate  20  years  and  2  months,  until 
the  men  arrive  at  the  age  of  81  years  and  6  months.  Interest  on 
$178,309  14  for  10  years  at  1  per  cent 18,865  02 

197,174  16 
2d  10  years'  interest 20,854  80 

218,028  96 

The  men  cease  to  labor  at  the  age  of  61  years  and  4  months,  and  expend 
during  20  years  and  2  months,  six  times  more  than  when  labor  was  at  $1 
per  day.  They  expend  six  times  $14,995.  Deduct 89,97000 

$128,058  96 


With  interest  at  seven  per  cent,  and  labor  at  $1  per 
day,  (see  Sec.  VI.,)  the  two  men  leave  to  their  heirs 
$500,000 ;  while  with  interest  at  one  per  cent,  arid  labor 
at  $6  per  day,  they  leave  to  their  heirs  $128,058,  only  a 
fraction  over  one-fourth  as  much  as  in  the  former  case. 
The  interest  on  $500,000  at  seven  per  cent  would  be 
$35,000  annually.  It  would  take  the  labor  of  one  man  at 
$1  per  day,  one  hundred  and  sixteen  years  to  pay  the  in- 
terest for  a  year.  The  interest  on  $128,058  at  one  per 
cent,  would  be  $1,280.  The  labor  of  one  man  for  two 
hundred  and  thirteen  days,  at  $6  per  day,  would  pay  the 
interest  for  a  year. 


132 


SECTION  IX. 

EFFECTS  UPON  PRODUCERS  OF  HIGH  AND  FLUCTUATING 
RATES  OF  INTEREST. 

The  following  illustration,  based  upon  land,  will  show 
the  effect  of  high  and  varying  rates  of  interest  upon  pro- 
ducers, and  the  safety  with  which  money  could  be  loaned, 
if  interest  were  reduced  to  a  just  and  uniform  rate. 

Suppose  W.  owns  a  thousand  acres  of  land,  which  he 
has  bought  from  the  Government,  and  upon  which  he  is 
paying  the  taxes.  The  land  will  produce  no  income,  un- 
less he  cultivates  it  himself,  or  sells  or  rents  it  to  others, 
who  will  cultivate  it.  He  sells  the  land  in  five  tracts,  of 
two  hundred  acres  each,  at  five  dollars  per  acre.  A.  B.  C. 
D.  and  E.  are  the  purchasers,  and  move  upon  and  culti- 
vate the  land,  and  pay  the  taxes.  No  other  payment  is  to 
be  made  for  five  years,  at  the  expiration  of  which  period, 
A.  B.  C.  D.  and  E.  are  to  pay  up  the  interest  on  their 
respective  tracts  of  land,  and  after  that  to  pay  the  interest 
annually.  All  the  land  sold  is  of  nearly  the  same  quality. 
Each  purchaser  agrees  to  pay  a  thousand  dollars,  and 
gives  a  bond  and  mortgage  upon  his  land  to  secure  the 
payment.  W.  takes  A.'s  bond  and  mortgage,  bearing  two 
per  cent  interest ;  B.'s  bearing  four  per  cent ;  C.'s  bearing 
eight  per  cent ;  D.'s  bearing  sixteen  per  cent ;  and  E.'s 
bearing  thirty-two  per  cent  interest.  At  the  end  of  five 
years,  A.'s  bond  and  mortgage  will  have  drawn  $100 ;  B.'s 


133 


$200;  C.'s  $400;  D/sftSOO;  and  E.'s  $1,600  interest. 
Yet  W.  sells  the  land  to  all  at  the  same  price,  and  all  the 
difference  of  the  indebtedness  of  A.  and  E.  is  caused  by 
the  difference  of  the  rates  of  interest  that  W.  charges 
them.  This  difference  makes  E.  indebted  to  W.  $1,500 
more  than  A.  All  the  debtors  must  pay  the  interest  with 
the  products  of  their  respective  farms,  and  W.  does  none 
of  the  labor  toward  making  the  production. 

Now  suppose  X.  to  sell  the  same  land  to  the  parties  on 
a  credit  of  one  year,  and  to  charge  them  six  per  cent  in- 
terest. Suppose  money  to  be  so  scarce,  that  at  the  end 
of  the  year  they  clear  only  the  interest,  and  are  compelled 
to  lose  their  farms  by  a  foreclosure  of  their  mortgages,  or 
else  to  borrow  the  money  and  pay  off  the  mortgages.  A. 
B.  C.  D.  and  E.  borrow  the  money  on  the  best  terms  pos- 
sible on  mortgage  of  their  farms  and  stock.  A.  procures 
the  money  at  two  per  cent  interest ;  B.  at  four  per  cent ;  C. 
at  eight  per  cent ;  D.  at  sixteen  per  cent ;  and  E.  is  com- 
pelled to  pay  thirty-two  per  cent  per  annum,  or  two  and 
two-thirds  per  cent  a  month.  This  amounts  to  the  same 
thing  as  if  they  had  bought  their  farms  of  W.,  agreeing  to 
pay  the  same  rates  of  interest.  The  money  enables 
them  to  keep  possession  of  their  farms.  From  the 
sales  of  their  products^  they  must  pay  the  different  debts 
and  interest.  The  different  rates  of  interest  decide 
what  proportion  of  their  products  shall  go  to  pay  for 
the  use  of  the  farms.  When  the  farmers  borrow  the 
money  to  pay  off  their  mortgages,  they  do  not  keep  the 
money.  It  continues  to  circulate,  and  to  decide  what 
rents  others  shall  pay  for  the  privilege  of  keeping  the  use 
of  property  for  a  given  period. 


134 


But  suppose  the  rate  of  interest  to  be  fixed  at  one  per 
cent,  and  that  money  could  always  be  obtained  on  the 
offer  of  good  security.  Those  who  had  money  to  lend 
would  ascertain  whether  the  property  offered  as  security 
would  make  the  interest  safe.  If  so,  the  security  would  be 
deemed  good.  When  interest  is  liable  to  rise  from  six  to 
twelve  per  cent,  the  lenders  of  money  require  securities 
that  will  make  their  loans  safe  if  the  interest  should  rise  to 
twelve  per  cent.  But  if  the  supply  of  money  were  such 
that  the  interest  could  not  rise,  a  less  security  would  al- 
ways keep  loans  safe.  Suppose,  then,  the  rate  of  interest 
to  be  at  one  per  cent,  and  W.  to  sell  the  land  to  A.  B.  C. 
D.  and  E.,  as  before.  Each  purchases  two  hundred  acres 
at  $5  per  acre,  and  for  five  years  pays  only  the  taxes.  At 
the  end  of  five  years,  they  pay  the  five  years'  interest. 
The  interest  on  $1,000  for  five  years,  at  one  per  cent, 
amounts  to  $50 ;  and  the  interest  on  the  whole  $5,000,  for 
five  years,  amounts  to  but  $250,  instead  of  to  $4,100,  as 
in  the  former  case,  when  it  was  loaned  at  the  various  and 
higher  rates  of  interest.  The  tenants  have  the  use  of  the 
farms  as  much  to  pay  the  $250,  as  to  pay  the  $4,100.  If 
they  make  any  reasonable  improvement  on  the  farms,  W. 
can  incur  no  hazard  of  losing  his  money.  Certainly  each 
farm  would  rent  for  $10  a  year.  Even  if  the  farmers 
should  not  pay  the  interest  at  the  close  of  the  five  years, 
and  the  farm  would  rent  for  $10  50  a  year,  over  and  above 
the  taxes,  the  farms  would  still  be  as  good  as  $1,050,  at 
interest,  at  one  per  cent ;  therefore,  in  either  case,  they 
would  keep  the  sale  of  the  land  good,  or  the  loan  safe  for 
W.,  without  his  personal  labor  to  cultivate  them.  If  W. 
should  sell  the  farms,  at  the  end  of  five  years,  interest  at 


135 


six  per  cent,  each  of  the  farmers  would  owe  him  $300 
interest,  which,  added  to  the  principal,  would  make  $1,300. 
The  interest  on  this  sum,  at  six  per  cent,  would  be  $78 
annually,  and  unless  each  farm  would  rent  for  this  sum, 
W.'s  debt  would  not  be  safe.  The  per  centage  interest 
on  the  cost  of  property  must  be  equal  to  the  rate  per 
cent  on  money,  or  the  property  cannot  be  good  security 
for  the  payment  of  the  money. 

The  borrower  of  money  is  said  to  pay  a  certain  rate  of 
interest,  for  the  use  of  the  money  borrowed.  He  may  not, 
however,  use  the  money  a  single  day.  He  immedi- 
ately pays  a  debt,  or  purchases  property  with  it,  and  yet 
he  pays  interest  on  it  for  a  year.  The  rate  of  interest  de- 
termines what  price  the  borrower  shall  pay  for  the  use  or 
rent  of  the  property  which  he  purchases  with  the  money. 

A  few  illustrations  will  show  the  effect  of  increased 
rates  of  interest  upon  the  welfare  of  producers  and  dis- 
tributers whose  property  is  in  their  products.  Suppose  a 
cotton  planter  raises  a  hundred  bags  of  cotton.  In  doing 
so  he  must  either  pay  for,  or  become  indebted  for  bag- 
ging, rope,  clothing  for  his  workmen,  &c.  He  is  com- 
pelled to  realize  the  money  for  his  cotton  as  soon  as  he 
can  get  it  to  market.  Money  is  very  scarce,  and  the 
price  of  cotton  extremely  low.  The  planter  is  obliged 
either  to  sell  for  cash,  or  offer  a  commission  to  some 
one  to  accept  his  draft  on  the  pledge  of  the  cotton.  He 
is  forced  to  pay  for  his  acceptance  two  and  a  half  per  cent. 
This  will  take  the  proceeds  of  two  and  a  half  bales  of  cot- 
ton. If  the  draft  be  drawn  on  three  months  time,  and  the 
scarcity  of  money  compel  the  planter  to  sell  the  draft  at 
two  per  cent  a  month,  six  bales  more  will  be  taken 


136 


from  his  one  hundred  bales.  He  must  lose  eight  and  a 
half  bales  for  the  privilege  of  keeping  the  remainder  three 
months  in  store,  besides  the  storage,  cartage,  and  the  com- 
mission on  sales.  The  proceeds  of  the  eight  and  a  half 
bales  of  cotton  are  gained  by  the  capitalist  by  means  of 
the  high  rate  of  interest,  and  without  any  adequate  labor 
on  his  part.  Under  a  proper  monetary  system,  the  plant- 
er would  be  able  to  hold  his  cotton  a  year  without  losing 
even  two  bales  of  it  for  the  advance  of  money. 

Again,  suppose  interest  to  be  at  six  per  cent.  A  manu- 
facturer makes  a  package  of  a  hundred  pieces  of  cloths, 
and  sends  them  to  market.  Six  months  pass  before  the 
goods  can  be  sold,  and  he  loses  three  pieces  as  the  inter- 
est on  the  ninety-seven  which  he  has  left.  If,  at  the  end 
of  six  months,  the  commission  merchant  sell  them  on  a 
credit  of  eight  months,  the  manufacturer  must  lose  four 
pieces  more,  in  all  seven  pieces  of  cloth,  and  this  he  loses 
when  interest  on  money  is  at  six  per  cent.  But  the  manu- 
facturer is  greatly  in  need  of  money,  and  must  have  the 
eight  months'  note  cashed.  Interest  having  risen,  the 
commission  merchant  sells  the  note  in  market  at  two  per 
cent  a  month  discount.  This  makes  the  manufacturer 
lose  sixteen  pieces  of  cloth  on  the  note,  instead  of  four 
pieces,  as  at  six  per  cent.  Add  these  to  the  first  three, 
and  it  will  make  nineteen  pieces  paid  to  others  out  of 
the  one  hundred  pieces,  to  enable  him  to  keep  eighty- 
one  pieces,  or  their  proceeds,  for  fourteen  months. 
These  are  a  total  loss  to  the  manufacturer.  Besides,  he 
has  to  pay  cartage,  storage,  commission  and  transporta- 


137 


tion.     The  proceeds  of  the  nineteen  pieces  of  goods  go 
into  the  hands  of  the  money-lender. 

Now  let  us  see  the  result  in  the  same  transaction,  if  in- 
terest on  money  were  reduced  to  one  per  cent,  and  main- 
tained at  that  rate.  The  manufacturer  sends  the  hundred 
pieces  of  cloths  to  market,  and  they  lie  six  months  unsold. 
He  loses  only  half  a  piece  of  cloth  for  the  six  months' 
interest  on  his  goods.  The  commission  merchant  sells 
them  on  eight  months'  credit,  as  before,  and  gets  the  note 
discounted  at  the  rate  of  one  per  cent  per  annum.  This 
amounts  to  two-thirds  of  a  piece  of  cloth,  and  added  to 
the  half  piece,  is  a  loss  to  the  manufacturer  of  one  piece 
and  one-sixth  of  a  piece  during  the  fourteen  months,  in- 
stead of  being  a  loss,  as  in  the  former  case,  of  nineteen 
pieces.  This  difference  is  caused  solely  by  the  rate  of 
interest. 

Although  the  bales  of  cotton  or  the  pieces  of  goods  lie 
unused  and  uninjured  in  the  storehouse,  yet  a  number  of 
bales  of  cotton  or  pieces  of  goods  are  taken  from  their 
owners  by  the  legal  growth  of  the  money,  or  by  the  growth 
or  accumulation  on  the  paper  obligation  given  to  obtain 
the  money.  The  rate  of  interest  decides  how  many  bales 
of  cotton  shall  be  owned  by  the  planter — how  many  pieces 
of  goods  shall  be  owned  by  the  manufacturer;  and  the 
proportion  of  them  that  shall  be  given  to  those  who  fur- 
nish  the  money. 

18 


138 


SECTION  X. 

THE  OPPRESSION  OF  LABOR  BY  A  MONOPOLY  OF  LAND  NOT 
AS  GREAT  AS  THE  OPPRESSION  BY  HIGH  RATES  OF  IN- 
TEREST ON  MONEY. 

It  is  supposed  by  many,  that  the  monopoly  of  land  is 
the  cause  of  the  concentration  of  wealth  in  the  hands  of 
a  few,  and  that  land  owners  are  the  greatest  oppressors. 
But  in  the  illustration  of  the  one  hundred  families  and  their 
descendants,  (see  Chap.  III.,  Sec.  II.,)  no  land  is  bought 
except  the  two  hundred  acres  for  their  personal  residences ; 
yet  they  take  from  the  people  as  large  a  quantity  of  their 
products,  by  the  interest  on  money,  or  on  their  obligations, 
as  if  they  had  invested  the  twenty  millions  in  farming  land, 
and  let  the  land  out  to  tenants  at  six  per  cent  interest  on 
its  cost,  re-investing  the  interest  half  yearly  in  land  during 
the  hundred  and  fifty  years.  The  tenant  of  leased  land 
pays  the  rent  by  the  sale  of  its  yearly  products.  If  he 
cannot  support  himself  well  besides  paying  the  rent,  it  is 
evident  to  all  that  the  rent  is  too  high.  The  landlord  and 
the  tenant  come  in  direct  contact,  and  the  wrong  done  by 
the  former  to  the  latter  is  manifest.  But  nothing  grows 
upon  money  with  which  the  borrower  can  pay  the  interest. 
He  exchanges  it  for  merchandise  or  lands,  and  expects  to 
make  a  profit  on  them  which  will  pay  the  interest  on  the 
money.  If,  however,  he  be  not  able  to  pay  the  interest,  it 

is  set  down  as  bad  management,  on  his  part,  instead  of  be- 
ing attributed  to  the  too  high  rates  of  interest  on  the  money. 


139 


The  owner  of  money,  by  the  legal  interest,  imposes  as 
great  hardships  upon  the  borrower,  as  if  he  had  loaned  him 
land  or  merchandise  at  the  same  per  centage  on  its  val- 
uation. 

The  following  illustration  will  show  the  different  esti- 
mates put  upon  the  leasing  of  land  at  a  certain  per  centage 
on  its  value,  and  the  loaning  of  money  at  the  same  rate. 
K.  is  the  owner  of  $100,000.  He  expends  this  sum  for 
well  improved  farms,  which  he  leases  in  perpetuity  at  six 
per  cent  per  annum  on  their  cost.  His  tenants  are,  there- 
fore, obliged  to  pay  $6,000  a  year  for  the  use  of  the  farms. 
They  would  find  it  very  difficult  to  pay  so  high  a  rent ; 
and  it  would  be  deemed  very  oppressive  to  them  and  to 
their  heirs,  who  must  work  the  land.  If  the  owner  of  the 
land  should  require  from  each  tenant  security  for  the 
rent,  so  that  one  must  become  responsible  for  the  pay- 
ment of  another's  rent,  he  would  be  thought  a  hard  land- 
lord. And  if,  in  time  of  drought  or  disease,  which  rendered 
the  tenants  unable  to  pay  their  rent,  the  landlord  should 
sell  the  stock  from  their  farms,  he  would  be  deemed  very 
oppressive,  although  his  tenants  had  voluntarily  entered 
into  the  engagement. 

Now,  suppose  M.  to  own  $100,000,  which  he  loans  on 
interest  at  six  per  cent  per  annum,  payable  half  yearly.  To 
secure  the  loan,  he  requires  double  its  value  in  land, 
so  that  he  is  twice  as  well  secured  as  the  land-owner. 
He  allows  the  principal  to  remain  outstanding  as  long  as 
the  interest  is  regularly  paid.  He  annually  receives 
$6,000  interest  on  his  money,  the  same  surii  that  the  land- 
owner receives  for  the  rent  of  his  land,  and  he  is  much 
better  secured,  for  in  some  years  the  crops  may  fail ;  but 


140 


the  mortgaged  land,  being  twice  the  value  of  the  loan,  is  a 
double  security,  and  will  force  the  sale  of  the  farm  if  the 
interest  be  not  paid.  It  takes  as  many  of  the  products  of 
labor  to  pay  the  interest  to  the  moneylender,  as  to  pay 
the  rent  to  the  land-owner;  yet  the  money-lender  is 
deemed  a  just  and  honorable  man,  because  he  takes  only 
six  per  cent  interest  for  his  money.  If  at  any  time  the 
scarcity  of  money  and  the  low  price  of  products  prevent 
the  payment  of  the  interest,  and  the  money-lender  fore- 
close some  of  his  mortgages,  buying  in  the  property,  worth 
double  the  amount  loaned,  at  half  price,  no  stigma  rests 
upon  his  character,  especially  if  the  legal  rate  of  interest 
be  seven  per  cent,  and  he  charge  but  six  per  cent  Al- 
though these  cases  are  so  differently  regarded, '  the  op- 
pression by  loaning  money  at  six  per  cent  interest  greatly 
exceeds  that  by  leasing  property. 

The  following  illustration  shows  how  tenants  of  land 
are  affected  by  high  rates  of  interest  on  money.  N.  owns 
a  farm  which  he  cultivates.  He  is,  therefore,  the  rightful 
owner  of  the  products.  If,  however,  N.  lets  the  farm  to 
O.,  and  O.  cultivates  it,  then  N.  and  O.  are  joint  owners 
of  the  products.  This  principle,  that  labor  and  capital  are 
together  entitled  to  the  products,  is  in  accordance  with 
the  laws  of  nations,  and  must  continue  to  be  so  as  long  as 
the  rights  of  property  are  recognized  by  civil  authority. 
The  question  which  arises  for  settlement  is,  what  propor- 
tion rightfully  belongs  to  the  capital,  and  what  to  the  la- 
bor— what  proportion  of  products  N.  should  receive  for 
the  use  of  the  farm,  and  what  proportion  O.  should  re- 
ceive for  his  labor  in  cultivating  it.  It  will  be  said  at 
once  that  the  proportion  which  O.  is  to  give  to  N.  is  a 


141 


matter  of  agreement  between  them ;  and,  therefore,  what- 
ever N.  agrees  to  take,  and  O.  agrees  to  pay  for  the  rent 
of  the  farm,  is  the  right  proportion;  and  that  no  laws 
should  interfere  in  such  contracts  except  to  compel  their 
fulfilment.  This  would  be  right  and  just  to  both  the  con- 
tracting parties,  if  the  public  standard  of  value  on  which 
they  are  compelled  to  found  the  contract  were  equitable. 
But  if  the  standard  or  rate  of  interest  be  such  that  O.  is 
obliged  by  its  legal  operation  to  pay  nearly  the  whole  sur- 
plus products  of  the  farm  to  N.  as  rent,  the  contract  is  a 
manifest  wrong  to  O. ;  because,  although  he  work  dili- 
gently all  his  life,  the  legal  standard  keeps  him  forever 
poor,  while  N.,  by  the  action  of  the  same  standard,  with- 
out labor,  will  constantly,  increase  in  wealth. 

We  declare  that  all  men  are  born  free  and  equal ;  but 
N.  may  be  born  heir  to  a  dozen  farms,  while  O.  may  be 
born  without  property ;  and,  under  present  laws,  by  his 
labor  alone  he  cannot  acquire  it.  Therefore,  N.  is  actually 
born  to  live  in  luxury  without  labor,  and  O.  is  born  to  be 
a  servant  to  N.  O.'s  children  are  born  servants  to  N.,  and 
to  his  posterity,  and  live  in  perpetual  toil  and  hardship, 
that  N.'s  children  may  be  supplied  with  all  the  luxuries  of 
life  without  labor.  N.  and  his  children  receive  these  lux- 
uries from  the  rent  that  O.  and  his  children  pay  for  the  use 
of  the  land  owned  by  N.  If  all  men  are  by  nature  free  and 
equal,  why  has  legislation  reversed  the  order  of  nature  so 
as  to  secure  the  greatest  possible  inequality  ?  It  is  not  in 
the  power  of  man  to  continue  a  more  effectual  method  of 
concentrating  property  in  a  few  hands,  than  by  high  rates 
of  interest.  This  method  works  rapidly  and  securely,  be- 
cause it  extorts  consent  as  it  operates.  If  civilization  re- 
quire, as  its  basis,  that  property  should  descend  from 


142 


father  to  son,  it  certainly  does  not  require  that  legislation 
should  do  its  utmost  to  magnify  the  inequalities  arising  from 
this  right  of  inheritance.  These  inequalities  only  exist 
because  the  whole  body  of  producers  are  obliged  to  pay  an 
exorbitant  price  for  the  yearly  rent  of  every  description  of 
property ;  and  why  are  they  obliged  to  pay  this  price  ?  Be- 
cause the  rent  is  determined  by  the  legal  interest  on  money, 
the  standard  of  value,  to  which  no  individual,  nor  class  of 
individuals,  can  offer  successful  resistance.  If  N.,  instead  of 
leasing  the  farm  to  O.,  loan  him  money  with  which  to  pur- 
chase a  farm,  O.  rents  the  money  from  N.  instead  of  renting 
the  farm.  But  he  is  as  much  compelled  to  pay  the  interest 
on  the  money  with  the  products  of  the  farm,  as  he  is  to  pay 
the  rent  of  the  farm  with  the  products.  If  the  interest  on 
money  were  at  one  per  cent,  N.  could  not  let  his  farm  to 
O.  at  such  a  rate  as  to  compel  O.  to  give  him  in  rent  a 
sum  equal  to  the  principal  of  the  farm  in  less  than  about 
seventy  years.  But  if  interest  on  money  be  fixed  at  seven 
per  cent,  N.  can  compel  O.  to  give  a  rent  for  tine  farm 
which  will  equal  the  principal  of  the  farm  in  about  ten 
years.  At  this  rate,  in  seventy  years  O.  must  give  N.  the 
value  of  one  hundred  and  twenty-seven  farms  as  the  legal 
rent  of  one. 

In  fixing  the  rate  of  interest,  governments  determine 
what  proportion  of  their  earnings  the  producing  classes 
shall  pay  for  the  use  of  capital.  Laborers  have  no  means 
of  resisting  the  overwhelming  power  of  accumulation  given 
to  capital,  except  by  a  change  in  the  monetary  system, 
and  the  establishment  of  a  just  rate  of  interest.  Then  the 
inequalities  of  birth  and  condition  will  be  greatly  dimin- 
ished, and  no  class  of  laborers  can  be  kept,  for  any  length 
of  time,  subservient  to  capital. 


143 


SECTION  XI. 

THE  RATE  OF  INTEREST  DETERMINES  THE  PRICE  OF  PROP- 
ERTY, AND  A  RISE  OF  INTEREST  INCREASES  THE  POWER 
OF  MONEY  TO  COMMAND  PROPERTY. 

The  value  of  money  is  determined  by  the  interest  that 
it  will  accumulate  ;  and  the  value  of  all  property  is  deter- 
mined by  the  rent  that  can  be  obtained  for  it.  The  market 
value,  or  the  price  of  property  must  conform  to  the  legal 
standard. 

If  the  rent  of  any  property  be  not  sufficient  to  accumu- 
late a  sum  equal  to  the  estimated  value  of  the  property 
itself,  in  as  short  a  period  as  money  loaned,  the  property 
will  fall  in  price  until  the  rent  bears  the  same  proportion 
to  the  value  of  the  property  that  the  rate  of  interest  bears 
to  the  principal. 

•  It  is  perfectly  right  that  the  interest  on  money  should 
govern  by  its  own  per  centage  the  rent  of  all  property,  be- 
cause money  is  the  legal  representative  of  all  property, 
and  the  standard  by  which  its  value  is  estimated.  This 
interest  is  of  the  same  quality  and  value  as  the  principal 
loaned ;  and  the  per  centage  on  property  must  be  made 
conformable.  For  example  :  if  per  centage  be  in  the  pro- 
portion of  one  to  one  hundred,  the  tenant  of  a  hundred 
acres  of  poorly  cultivated  land,  must  pay  as  rent  a  sum  in 
money  equal  to  the  value  of  one  acre  of  land  of  the  same 
quality.  If  he  improve  the  farm  and  make  it  produce 
double,  he  must  pay  the  value  of  one  acre  of  improved 


144 


land  for  the  use  of  the  improved  one  hundred.  He  pays 
more  value,  but  no  greater  per  centage  on  the  value  of  the 
land.  Money  is  the  standard — if  the  per  centage  interest 
on  it  be  fixed  at  a  just  rate,  it  will  equitably  regulate  the 
rent  of  all  property,  and  also  secure  to  labor  its  earnings. 
The  value  of  property  depreciates  in  proportion  to  the 
increase  of  the  value  of  the  dollar  that  measures  it. 
Whenever  the  value  of  money  increases  by  a  rise  of  in- 
terest, there  is  a  corresponding  reduction  of  the  value  of 
property.  The  diminution  of  the  market  value  of  prop- 
erty, by  a  rise  of  interest,  may  be  compared  to  the  moving 
of  a  fulcrum  on  the  beam  of  a  scale.  As  one  end  of  the 
beam  is  lengthened,  the  other  end  is  shortened,  so  that  a 
pound  weight,  on  the  long  end,  may  balance  as  many  pro- 
ducts as  three,  four,  or  five  pounds  would  before  the  ful- 
crum was  moved.  So  with  the  rise  of  interest  on  money, 
property  falls  in  price,  so  that  one  dollar,  in  money,  bal- 
ances two,  three,  four,  or  five  times  more  property,  than 
it  did  before  the  rise.  Enough  property  must  be  added  to 
make  the  rent  equal  to  the  interest  on  money;  for  no 
man  will  invest  his  money  in  property,  unless  he  supposes 
that  the  property  will  yield  as  good  an  income  as  the 
money  he  pays  for  it.  Therefore  the  price  of  property 
must  fall  whenever  the  interest  on  money  increases,  that 
the  incomes  from  property  and  from  money  may  be  equal. 
When  the  power  of  the  dollar  to  accumulate  is  increased, 
no  alteration  is  made  in  its  form,  weight,  or  external  ap- 
pearance, as  when  the  fulcrum  is  moved  no  alteration  is 
made  in  the  weight,  but  the  power  of  the  weight  is 
increased. 


SECTION  XII. 

THE     RISE     OF    THE     RATE     OF   INTEREST    INCREASES   THE 
LIABILITIES    OF    ALL   DEBTORS. 

All  obligations  for  the  payment  of  money  are  based 
upon  money,  and  hold  the  same  position,  with  respect  to 
labor  and  property,  that  money  does.  They  are  private 
representatives  of  their  amount  of  money,  and  being  se- 
cured on  property,  call  for  the  payment  of  a  definite  sum 
of  money  as  principal,  and  a  definite  rate  of  interest. 
When  the  interest  on  money  rises,  property  falls  in  price, 
so  that  the  value  of  the  bonds,  notes,  mortgages,  &c.,  pay- 
able in  money,  is  increased  with  respect  to  property,  for 
they  will  purchase  more ;  but  their  value  is  diminished, 
compared  with  money,  for  the  interest  on  money  is  greater 
than  the  interest  on  the  obligations.  Hence  the  obliga- 
tions fall  below,  and  will  not  sell  for  their  par  value,  al- 
though they  continue  to  bear  the  same  rate  of  interest, 
and  to  call  for  the  same  amount  of  money  as  at  the  former 
period.  The  value  of  money  has  increased  above  its  for- 
mer value,  instead  of  the  value  of  the  obligations  being 
diminished,  except  relatively.  The  obligations  still  de- 
mand the  same  amount  of  money,  which  will  now  draw  a 
higher  rate  of  interest,  and  command  a  greater  amount  of 
property.  But  the  amount  of  interest  which  the  obliga- 
tions at  present  draw,  is  not  increased,  and  is  less  than 
that  on  money. 


146 


For  example,  if  interest  rise  from  six  to  twelve  per  cent, 
a  State  bond,  bearing  the  former  rate,  will  fall  below  its 
par  value,  but  will  continue  to  bear  the  same  rate  of  inter- 
est that  it  did  previously  to  the  rise  of  interest  on  money ; 
yet  the  bond  can  be  exchanged  for  more  property  than 
before  the  rise  of  interest.  Hence  the  liabilities  of  all 
debtors  whose  means  of  payment  are  in  their  property,  or 
in  their  ability  to  labor,  are  increased  in  proportion  to  the 
increase  of  interest  upon  money ;  because  the  full  amount 
of  all  debts  must  be  paid  in  money,  of  which  the  power  to 
purchase  property  has  thus  much  increased ;  or,  in  other 
words,  the  rise  of  interest  has  decreased  the  market  value 
of  property  and  labor,  so  that  two,  three,  four  or  five 
times  the  quantity  formerly  required,  must  be  sold  to  pro- 
cure money  to  cancel  debts. 

The  injustice  done  to  debtors  by  increasing  the  value 
of  the  measure  by  which  the  debts  were  contracted,  is 
evident.  It  has  already  been  shown  that  money,  the  mea- 
sure of  value,  constantly  fluctuates  ;  that  the  dollar  is  the 
measure  of  more  or  less  property,  according  to  the  rate  of 
interest.  If,  therefore,  debts  are  contracted  when  interest 
is  low,  and  fall  due  when  interest  is  high,  it  will  require  a 
much  larger  quantity  of  property  to  pay  them  than  was 
understood  in  the  contract. 

The  following  is  a  familiar  illustration  of  this  principle. 
A.  man  agrees  to  make  and  deliver  to  another  nine  yards 
of  cloth.  He  brings  the  usual  amount  of  cloth  to  fulfil  the 
contract,  but  in  the  meantime,  the  length  of  the  yard-stick 
is  increased  to  four  and  a  half  feet,  and  the  cloth  falls  a 
third  short  of  the  required  length.  The  debtor  weaves  a 
third  more  on  the  end  of  the  piece,  and  presents  it.  The 


147 

length  of  the  yard-stick  is  again  increased  to  six  feet,  and 
the  cloth  again  falls  short.  The  construction  of  the  yard- 
stick may  allow  its  length  to  be  increased  without  addi- 
tional labor,  but  the  debtor  is  obliged  to  add  both  labor 
and  material  to  produce  the  required  length  of  cloth.  The 
additional  cloth  is  fraudulently  taken  from  him  by  the  in- 
crease of  the  length  .of  the  measure. 

To  exemplify  the  principle  with  respect  to  money,  the 
measure  of  value.  The  rise  of  interest  on  money  increases 
the  liabilities  of  all  debtors.  A  man  lends  on  mortgage  of 
a  house  and  three  vacant  lots,  $1,000  at  six  per  cent 
interest.  The  interest  on  the  money  for  a  year  is  $60, 
and  the  house  of  the  borrower  rents  for  $60  a  year.  The 
rate  of  interest  increases  to  nine  per  cent,  consequently, 
the  interest  on  the  $1,000  increases  to  $90.  To  make  the 
loan  safe  at  the  advanced  interest,  the  borrower  is  re- 
quired to  erect  another  house  on  one  of  the  lots  covered  by 
the  mortgage.  He  builds  one  costing  $500,  and  lets  it  for 
$30.  The  two  houses  now  bring  $90  a  year,  just  the 
interest  on  $1,000.  Interest  rises  to  twelve  per  cent,  and 
the  holder  of  the  mortgage  requires  the  borrower  to  erect 
a  second  house,  costing  $500,  on  another  vacant  lot  cov- 
ered by  the  mortgage.  This  house  is  likewise  let  for  $30. 
The  three  houses  rent  for  $120,  and  the  mortgage  for 
$1,000  draws  twelve  per  cent.  The  mortgage  now  brings 
inasmuch  income  as  the  three  houses.  The  $1,000  as 
much  balance  the  value  of  the  three  houses  now,  as  they 
did  that  of  the  one  house  when  the  money  was  loaned ; 
for  it  now  takes  the  rent  of  three  houses,  as  it  then  did 
that  of  one  house,  to  pay  the  interest  on  the  mortgage. 
Two  houses  are  added  by  material  and  labor,  and  no  ma* 


148 


terial  or  labor  is  added  to  the  mortgage  or  money ;  yet  the 
mortgage  or  money  at  twelve  per  cent  interest,  is  worth 
as  much  to  the  holder  as  the  whole  property. 

As  the  value  of  money  increases,  the  market  value  of 
the  things  to  be  measured  by  it  decreases,  so  that  it  works 
in  a  double  ratio  against  producers,  for  rents  of  property 
diminish  as  interest  on  money  increases.  But  in  the  fore- 
going example,  this  feature  has  not  been  exhibited,  no  dimi- 
nution of  rent  being  supposed  to  take  place  in  consequence 
of  the  rise  of  interest,  although  experience  proves  that 
this  is  the  invariable  result. 


SECTION  XIIL 

RENTS,  WHETHER  HIGH  OR  LOW,  BEAR  THE  SAME  RELATIVE 
VALUE  TO  THEIR  PRINCIPAL  ;  BUT,  WHEN  THE  PER  CENT- 
AGE  INTEREST  ON  MONEY  IS  INCREASED,  ITS  RELATIVE 
PROPORTION  TO  THE  PRINCIPAL  IS  NOT  ONLY  INCREASED, 
BUT  EACH  FRACTIONAL  PART  HAS  INCREASED  VALUE. 

It  is  proposed  to.  show  that  there  is  a  wide  difference 
between  renting  property  and  loaning  money,  and  that  the 
rent  and  market  value  of  property  decrease  in  proportion 
to  the  rise  of  interest,  whereas  the  market  value  of  money, 
and  the  interest  upon  it,  increases  in  direct  proportion  to 
the  rise  of  interest. 

If  the  rent  of  a  farm,  store,  or  house,  rise  to  double,  the 
price  of  the  farm,  store,  or  house  is  increased  to  double  its 
former  price.  If  the  rent  of  the  farm  before  the  rise  be 
$300  over  repairs,  &c.,  and  money  be  at  six  per  cent  in- 
terest, the  farm  is  worth  $5,000.  But  if  the  rent  of  the 
farm  rise  to  $600,  and  the  farm  can  be  readily  let  for  this 


149 
i 

price,  the  price  of  the  farm  will  be  increased  to  $10,000. 
Therefore,  if  the  owner  invest  the  income  or  rent  of  the 
farm  in  other  land  before  the  rise  of  rent,  he  can  buy  as 
much  land  with  the  $300,  as  he  can  buy  after  the  rise  with 
$600.  If  the  rent  of  the  farm  fall  again  to  $300,  the  price 
of  the  farm  will  fall  again  to  $5,000 ;  but  the  $300  will 
buy  twice  as  much  land  as  it  would  if  the  rent  had  been 
maintained  at  $600. 

Neither  the  rise  nor  the  fall  of  rent  alters  the  actual 
value  of  the  farm,  for  its  productiveness  is  neither  in- 
creased nor  diminished  by  either.  The  nutritive  prop- 
erties of  its  wheat  and  corn  cannot  be  altered  by  the  rise 
or  fall  of  its  rent.  But  the  dollar  received  when  the  rent  is 
$600,  is  worth  only  one-half  as  much  as  the  dollar  when 
the  rent  is  but  $300 ;  for  when  rent  is  low,  one  dollar 
will  buy  as  much  land  as  two  will  when  rent  is  double. 
The  intrinsic  value  of  the  property  undergoes  no  material 
change,  but  the  standard  changes  by  which  its  market  val- 
ue is  estimated.  Now  note  the  different  effects  of  the  rise 
of  the  rent  on  property,  and  the  rise  of  interest  on  money. 
Let  the  rate  of  interest  on  money  rise  from  six  to  twelve 
per  cent,  and  the  rent  on  property  will  inevitably  fall  in 
about  the  same  ratio.  The  price  of  property  will  of  course 
fall  in  proportion  to  the  fall  of  its  rent.  So,  when  interest 
on  money  is  doubled,  the  value  of  every  dollar  received  as 
interest  is  doubled ;  for  each  dollar  of  interest  will  buy 
double  the  property  that  it  would  before  the  rise.  But 
wrhen  the  rent  on  property  is  doubled,  the  dollar  is  worth 
but  half  as  much  as  it  was  before  the  rise  of  rent  on  prop- 
erty ;  for  it  will  not  purchase  more  than  half  as  much 
property  as  it  would  before  the  rise  of  rent. 


150 


If  the  rent  on  land  rise  to  double,  the  land  itself  will  sell 
for  double  its  former  price ;  therefore,  the  rent  will  not 
double  its  principal  of  land  in  any  shorter  time  in  conse- 
quence of  the  rise.  But  when  interest  on  money  rises  to 
double,  the  interest  will  double  the  principal  in  half  the 
time  that  it  would  before  the  rise  of  interest.  When  the 
rent  on  land  rises,  the  rent  continues  to  hold  the  same 
relative  value  to  its  principal  of  land  that  it  did  previous 
to  the  rise.  But  when  the  interest  on  money  rises  to 
double,  the  relative  proportion  of  the  interest  to  the  prin- 
cipal is  doubled. 

For  example :  P.  lends  to  Q.  for  a  year  $20,000  at  six 
per  cent  interest.  The  interest  amounts  to  $1,200.  P. 
invests  this  income  in  a  farm  at  the  then  market  price  of 
land.  At  the  commencement  of  the  following  year,  there 
is  a  scarcity  of  money,  and  P.  re-loans  to  Q.  the  same 
$20,000  at  twelve  per  cent  interest.  At  the  end  of  the 
year,  Q.  must  pay  to  P.  as  the  interest  on  the  $20,000, 
$2,400,  twice  the  sum  that  he  paid  the  previous  year. 
Scarcity  of  money  and  high  rates  of  interest  invariably 
depreciate  the  price  of  property.  Its  price  falls  one- 
half,  so  that  each  dollar  of  the  $2,400  received  as  the  in- 
terest on  the  money  when  interest  is  high,  will  purchase 
twice  as  much  property  as  it  would  before  the  rise  of  in- 
terest. Hence,  if  the  interest  at  six  per  cent  on  $20,000 
will  buy  a  farm  worth  $1,200,  when  the  interest  on  the 
$20,000  rises  to  twelve  per  cent — i.  e.,  to  $2,400,  and  the 
price  of  the  farm  falls  one-half,  the  $2,400  will  buy  four 
farms,  all  as  good  as  the  first  bought  at  $1,200.  The  in* 
come  from  the  $20,000  will  be  worth  four  times  as  much 
as  it  was  before  the  rise  of  interest 


151 


Making  the  calculation  in  dollars  and  cents,  we  shall 
arrive  at  the  same  result.  The  interest  on  $20,000  at  six 
per  cent  is  $1,200.  Loan  the  $1,200  at  six  per  cent,  and 
it  will  accumulate  in  the  ensuing  year  $72.  Now  loan  the 
$20,000  at  twelve  per  cent,  and  we  have  $2,400  as  its  in- 
terest for  the  year.  Loan  the  $2,400  at  twelve  per  cent, 
and  it  will  accumulate  in  the  ensuing  year  $288,  just  four 
times  $72.  Thus  the  value  of  the  income  at  twelve  per 
cent  is  four  times  greater  than  at  six  per  cent,  whether  it 
be  invested  in  land,  or  whether  it  be  re-loaned  on  interest. 
With  interest  at  twelve  per  cent  per  annum,  the  capitalist 
possesses  power  to  monopolize  property  four  times  greater 
than  with  interest  at  six  per  cent  per  annum. 


SECTION  XIV. 

TO  CHEAPEN  PRICES  BY  AN  UNJUST  RATE  OF  INTEREST 
AND  A  SCARCITY  OF  MONEY,  IS  BUT  TO  CHEAPEN  THE 
LABOR  OF  ALL  PRODUCERS,  AND  GIVE  THEIR  EARN- 
INGS TO  THE  CAPITALIST  WITHOUT  AN  EQUITABLE 
EQUIVALENT. 

When  low  prices  are  paid  for  labor,  the  prices  of  pro- 
ducts are  proportionally  low.  It  is,  therefore,  generally 
supposed  that  the  laborer  can  as  readily  procure  all  needful 
supplies  when  labor  is  at  a  low  price,  as  when  it  is  at  a 
high  one.  But  the  articles  whose  price  is  diminished  by 
the  lowering  of  labor,  are  the  productions  of  labor ;  and 
the  producing  classes  suffer  great  injury  from  this  de- 
pression of  both  their  labor  and  products. 


152 


The  following  illustration  will  exhibit  the  advantage  of 
high  prices  for  labor.  A  man  raises  a  hundred  bales  of 
cotton,  sends  them  to  market,  and  receives  three  and  a 
half  cents  per  pound.  A  laborer  in  New  York  receives 
fifty  cents  a  day  for  his  labor ;  with  a  day's  work  he  can 
purchase  fourteen  pounds  of  cotton.  If  labor  be  at  a  dollar 
per  day,  and  cotton  at  seven  cents  per  pound,  with  a  day's 
labor  he  can  purchase  the  same  quantity.  If  labor  rise 
to  a  dollar  and  fifty  cents  a  day,  and  cotton  to  ten  and  a 
half  cents  per  pound,  a  day's  labor  will  still  purchase  four- 
teen pounds  of  cotton.  Thus  far  we  do  not  observe  the 
difference  of  price  to  have  any  influence  upon  the  ability 
of  the  laborer  to  purchase ;  but  we  have  yet  to  notice  the 
condition  of  that  class  of  producers  who  raise  the  cotton 
at  the  first  price,  three  and  a  half  cents  per  pound.  After 
paying  for  the  use  or  rent  of  the  plantation  one-half  the 
price  at  which  a  loan  of  money  can  be  obtained,  say  three 
or  four  per  cent  interest  on  the  cost  of  the  plantation,  they 
do  not  earn  fifty  cents  a  day,  but,  in  fact,  receive  little  or  no 
compensation  for  their  labor.  The  same  labor  and  land  are 
required  to  produce  cotton  when  it  brings  three  and  a  half 
cents,  as  when  it  brings  fourteen  cents  per  pound.  Sup- 
pose a  workman  in  New  York  to  buy  cotton  at  fourteen 
cents  per  pound;  a  barrel  of  flour  at  $8 ;  wheat  at  $1  50 
per  bushel;  potatoes  at  40  cents;  corn  and  rye  at  80 
cents ;  brown  sugar  at  10  cents ;  coffee  at  12  cents ; 
boots  at  $3  a  pair;  shoes  at  $1  ;  a  fur  hat  at  $3 ;  brown 
sheeting  at  10  cents  per  yard;  and  good  calico  at  12 
cents  per  yard.  If  labor  fall  to  50  cents  per  day,  and 
he  have  full  employment,  to  be  as  well  off  as  when  labor 
was  at  $2  per  day,  he  must  buy  flour  at  $2  per  barrel ; 


153 


wheat  at  37  1-2  cents  per  bushel;  potatoes  at  10  cents; 
corn  and  rye  at  20  cents ;  brown  sugar  at  2  1-2  cents  per 
pound;  coffee  at  3  cents;  boots  at  75  cents  per  pair; 
shoes  at  25  cents ;  a  hat  at  75  cents ;  brown  sheet- 
ing at  2  1-2  cents  per  yard ;  good  calico  at  3  cents ;  and 
everything  else  in  proportion.  Travelling  expenses,  rents 
and  taxes,  must  be  diminished  three-quarters.  All  the 
necessaries  of  life  must  be  reduced  in  price  three-quarters, 
or  the  laborer  who  is  out  of  debt  will  not  be  as  well  off 
when  labor  is  at  fifty  cents  per  day,  as  when  it  is  at  two 
dollars  per  day. 

But  suppose  one  class  of  the  laborers  to  buy  at  these 
low  prices,  what  will  the  producers  of  wheat,  rye,  corn, 
&c.,  receive  for  their  labor  ?  The  reason  that  the  laborer 
can  buy  as  much  cotton  when  labor  is  at  fifty  cents  per 
day,  as  when  it  is  at  two  dollars,  is,  that  he  buys  a  fellow- 
laborer's  products  at  a  price  which  will  not  pay  a  cent  a 
day  for  the  toil  of  producing  them.  So  when  the  prices 
for  labor  are  reduced  in  this  ratio,  laborers,  as  a  body,  are 
unable  to  provide  themselves  with  the  necessaries  of  life. 
The  reduction  of  the  prices  of  labor  and  products,  conse- 
quent upon  a  scarcity  of  money  and  a  rise  of  interest, 
forces  producers  and  merchants  to  suffer  great  losses,  be- 
cause the  diminution  of  the  prices  of  products  does  not 
diminish  the  amount  of  their  debts,  nor  their  legal  obliga- 
tions to  pay  them ;  while  capitalists  who  own  these  debts 
will  compel  laborers  and  owners  of  land  and  products  to 
sell  double,  treble,  and  quadruple  the  quantity  of  these,  to 
obtain  money  to  satisfy  the  debts.  Thus  wealth  passes 
with  great  rapidity  into  the  hands  of  a  few  capitalists.  If 
the  merchant  has  bought  goods  at  as  low  a  price  as  they 


154 


can  be  afforded  by  the  manufacturer,  it  is  no  safeguard 
against  loss  by  the  fall  of  goods  in  market,  because  the 
market  price  of  the  goods  does  not  depend  upon  the  labor 
necessary  to  their  production,  but  upon  the  ever-varying 
value  of  the  dollar.  Our  laws  make  the  dollar  the  real 
value,  and  producers  and  all  kinds-  of  property  are  con- 
trolled by  its  power. 

The  objection  is  often  urged,  that  to  make  money  plenty 
would  destroy  the  value  of  products.  But  how  would  or 
could  it  destroy  their  value,  to  allow  the  needy  to  earn 
the  means  to  purchase  them  ?  Will  not  a  starving  peo- 
ple buy  products  ?  Does  any  one  suppose  that  the  peo- 
ple of  Ireland  would  live  upon  their  present  scanty  food, 
if  their  labor  would  afford  them  the  means  of  purchas- 
ing more  and  better  ?  Was  there  ever  a  bad  market  for 
products  when  labor  was  receiving  what  are  called  high 
prices,  or  a  good  market  when  labor  was  at  a  low 
price  ?  The  market  is  made  poor  by  the  inability  of  the 
laboring  community  to  earn  enough,  by  their  labor,  to 
make  purchases.  If  labor  were  well  paid,  the  market 
would  always  be  good,  and  the  laborer,  assured  of  a  just 
reward,  would  work  cheerfully. 

Large  production,  at  a  fair  price,  gives  a  better  com 
pensation  to  producers,  than  half  production  at  double 
price.  The  families  of  producers  require  as  many  pro- 
ducts for  their  support,  when  products  are  diminished  one- 
half,  and  their  price  is  increased  to  double,  as  when  pro- 
ducts were  abundant.  Therefore  the  producers  cannot 
sell  a  sufficient  quantity  to  procure  the  sum  before  re- 
ceived, and  capital  makes  the  same  requisition  upon  their 
labor,  for  rent  or  interest,  as  if  their  crops  were  abundant. 


SECTION  XV. 
GENERAL   REMARKS   UPON   INTEREST. 

Money  earns  for  its  owner  by  an  accumulative  power  ; 
by  a  power  to  gather  things  already  produced,  and  not  by 
a  natural  power  of  growth,  like  that  contained  in  the  germ 
of  wheat  or  grain.  Where  this  power  to  accumulate  by 
interest  is  made  greater  and  more  rapid  than  the  natural 
power  of  production  by  labor,  this  law  of  interest  becomes 
a  most  powerful  engine  of  evil.  It  gathers  into  the  hands 
of  a  few  capitalists  the  productions  of  labor,  and  often 
deprives  the  producers  of  the  necessaries  of  life. 

All  nations  have  considered  money  to  be  wealth,  be- 
cause it  possesses  this  power  to  accumulate ;  but  whether 
made  of  gold  or  of  paper,  it  really  contains  a  very  small 
amount  of  actual  wealth.  The  laws  make  money  a  legal 
equivalent  for  all  property,  and  give  it  the  power  to  accu- 
mulate by  interest.  They  make  $100,000,  loaned  at  six 
per  cent  interest,  earn  for  its  owner  $6,000  a  year,  with- 
out labor  on  his  part,  while  the  labor  of  twenty  men,  for 
three  hundred  days  in  the  year,  at  a  dollar  a  day,  will  earn 
no  greater  sum.  The  labor  of  twenty  men,  for  a  year, 
would  make  a  visible  improvement  on  a  farm  ;  but  the  in- 
terest makes  no  visible  improvement  on  the  money  loaned. 

Nothing  has  prevented,  nor  now  prevents,  the  full  em- 
ployment, and  adequate  compensation  of  labor,  but  the 
monopoly  of  money,  and  unjust  rates  of  interest.  All  na- 


156 


tions  and  all  political  parties  profess  to  legislate  for  the 
protection  of  industry.  Instead  of  doing  this,  they  have 
from  time  immemorial  legislated  to  support  exorbitant  in- 
terest on  money.  As  the  interest  on  money  governs  the 
rent  or  use  of  all  property,  legislation,  by  fixing  high  rates 
of  interest,  has  always  supported  and  increased  capital, 
and  depressed  labor. 

It  is  impossible  for  the  people  of  a  nation  to  pay  three, 
four,  five,  or  a  higher  per  centage  for  the  yearly  use  of 
property,  and  also  furnish  themselves  with  the  comforts 
and  conveniences  of  life.  All  the  per  centage  collected 
for  the  rent  on  property,  or  as  the  interest  on  money, 
must  be  paid  by  sales  of  the  yearly  productions  of  labor, 
which  remain,  over  and  above  the  support  of  the  produ- 
cers. If  a  very  few  rich  men,  in  any  civilized  nation, 
should  live  frugally,  and  their  posterity  should  do  the 
same,  in  the  course  of  a  few  generations  they  would  re- 
duce to  poverty  nearly  every  other  individual  in  the  na- 
tion. Consequently,  under  present  monetary  laws,  extrav- 
•  agance  in  the  rich,  and  the  frequent  inefficiency  and  imbe- 
cility of  their  children,  are  great  advantages  to  producers. 
The  second  evil  is,  therefore,  necessary  to  modify  the 
overwhelming  power  of  the  first. 

The  income  or  interest,  legally  fixed  and  maintained 
upon  money,  governs  not  only  the  rent  of  property,  and 
the  dividends  on  stocks,  but  also  the  entire  general  in- 
come on  all  other  things,  because  the  interest  on  money 
is  the  standard.  This  income  is  a  yearly  tax  levied  upon 
producers,  which  at  the  present  rates  is  enormous  and  op- 
pressive. Laws  may  be  made  to  prevent  the  entailment  of 
property,  to  compel  banks  to  divide  yearly  or  half  yearly 


157 


their  earnings,  and  various  other  laws  may  be  made  to  pre- 
vent the  unjust  accumulation  of  property  in  the  hands  of 
the  few,  and  to  give  the  laborer  what  he  really  earns ;  but 
all  these  will  be  of  little  avail  to  ameliorate  the  wrong. 
But  as  the  per  centage  interest  is  reduced,  producers  will 
be  benefited ;  and  wrhen  it  is  reduced  and  maintained  at 
the  just  rate,  the  laboring  classes  will  receive  the  chief 
part  of  their  own  products.     The  currency  is   the  na- 
tional standard  by  which  the  value  of  the  labor  and  pro- 
ducts of  all  citizens  is  estimated,  and  all  are  obliged  to 
use  it  and  found  their  contracts  upon  it.     If  a  funda- 
mental law,  like  that  of  the  rate  of  interest  on  money, 
be  made  just,  it  will  be  easily  supported  by  other  just 
laws  ;  but  if  it  be  made  unjust,  it  will  be  difficult  to  sup- 
port it,  for  all  the  laws  which  sustain  it  must  necessarily 
be  unjust.     A  man  who  utters  a  falsehood,  must  sup- 
port it  by  other  false  assertions.    A  hundred  lies  may  be 
required  to  give  the  first  the  semblance  of  truth.     So 
if  a  nation  fix  an  unjust  standard  of  value,  every  law 
which  sustains    that  standard  must  be  unjust.    An  un- 
just standard  has  been  used  from  the  earliest  ages  of  which 
we  have  a  record ;  but  the  long  use  of  it  will  never  make 
it  just,  more  than  the  long  use  of  a  falsehood  with  a  hun- 
dred lies  to  support  it,  will  make  the  falsehood  truth ;  or 
the  long  use  of  evil,  make  the  evil  good.    When  govern- 
ments make  money  unlimited  in  quantity,  at  a  just  rate  of 
interest,  laws  will  be  simple,  debts  paid,  labor  rewarded, 
and  peace  and  happiness  will  pervade  the  country.    Money 
will  be  easily  obtained  in  exchange  for  labor,  instead  of 
labor  being  superabundant,  and  money  scarce.    Non-pro- 
ducing capital — i.  e.,  anything  which  requires  the  expen- 


158 


diture  of  labor  to  make  it  produce,  should  bear  a  low  in- 
terest. Actual  production  will  then  receive  a  suitable 
reward. 


SECTION  XVI. 

ESTIMATE  OF  A  JUST  RATE  OF  INTEREST. 

From  what  has  been  said  of  unjust  and  fluctuating  ratea 
of  interest,  it  is  not  to  be  inferred  that  money  loaned  should 
bear  no  interest ;  for  without  the  power  to  draw  interest, 
money  could  not  exist.  It  could  not  be  made  an  equiva- 
lent for  labor  or  its  products,  and  consequently  could  not 
be  maintained  as  a  medium  of  exchange.  We  are,  then, 
seeking  no  extreme  measures,  but  that  just  medium  of 
interest  which  shall  secure  to  the  whole  people  the  great- 
est good.  We  do  not  advocate  the  annihilation  of  in- 
terest, but  we  urge  that  the  amount  should  not  be  so 
great  as  to  oppress  the  laborer  whose  toil  produces  every 
necessary  of  life,  and  even  the  material  for  the  medium  of 
exchange. 

The  rate  of  interest  fixed  upon  money,  determines  what 
proportion  of  the  value  produced  by  labor  shall  be  awarded 
to  the  capitalist  for  the  use  of  his  capital,  and  what  pro- 
portion the  laborer  shall  receive  for  his  toil  in  making  the 
production. 

It  is,  therefore,  important  to  ascertain  what  per  centage 
the  people  of  a  nation  can  pay  to  capital,  and  still  receive 
a  due  reward  for  their  labor.  To  arrive  at  a  just  conclu- 
sion, we  must  form  an  estimate  on  a  large  scale,  and  for 


159 


a  term  of  years.  Take  the  following  as  such  an  estimate. 
Suppose  a  country  lay  off  our  coast  equal  in  every  respect 
to  that  of  the  United  States,  but  in  its  primitive  wildness. 
Allow  those  classes  of  people  whose  labor  makes  all  im- 
provements, to  have  the  use  of  the  United  States  in  their 
present  condition,  with  their  cities,  railroads,  canals,  farms, 
goods,  wares  and  merchandise,  bank,  State,  and  other 
stocks,  money,  &c.,  for  the  term  of  seventy  years.  At 
the  close  of  this  period,  niey  are  to  return  the  property 
uninjured  by  use,  perishable  articles  supplied  by  new  ones, 
and  decayed  buildings  and  machinery  repaired  and  renewed. 
And  for  the  use  or  rent  of  all  these,  they  are  meanwhile  to 
make  in  the  adjoining  new  country  every  improvement 
already  in  this ;  cities,  railroads,  canals,  shipping,  im- 
prove farms,  make  money,  stocks,  &c.,  &c.,  and  render 
the  country  in  every  respect  equal  to  the  United  States, 
At  the  end  of  seventy  years  they  must  return  the  United 
States,  together  with  the  new  country  with  all  its  improve- 
ments, and  this  would  only  be  paying  for  the  use  of  the 
property  an  interest  half  yearly,  at  the  rate  of  one  per 
cent  per  annum. 

By  making  an  estimate  upon  so  large  a  scale,  we  can 
form  an  opinion  of  the  rate  of  interest  money  ought  to 
bear.  I  will  repeat  the  -length  of  time  in  which  money 
doubles  at  certain  different  rates  of  interest,  the  interest 
being  paid  and  re-loaned  half  yearly.  At  two  per  cent  per 
annum,  it  will  double  in  about  thirty-five  years ;  at  three 
per  cent,  in  less  than  twenty-four  years ;  at  six  per  cent, 
in  a  little  less  than  twelve  years ;  and  at  seven  per  cent,  in 
a  little  more  than  ten  years.  If  the  laboring  classes  caii 
make  as  many  improvements  in  a  new  country  as  now  ex- 


160 


1st  in  this,  and  can  afford  to  give  the  whole  improvement 
for  the  use  or  rent  of  this  country  for  ten  years,  seven  per 
cent  would  be  a  just  rate  of  interest.  If  the  people  re- 
quire twenty-three  and  a  half  years  to  perform  this  labor, 
beside  making  a  comfortable  provision  for  themselves, 
three  per  cent  would  be  the  just  rate  ;  if  thirty-five  years, 
two  per  cent  ;  and  if  sixty-nine  and  a  half  years,  one  per 
cent  should  be  the  rate. 

Take  the  same  estimate  under  a  different  form.  Sup- 
pose all  species  of  property  in  the  nation  to  receive  a  fair 
valuation,  and  its  owners  sell  it  on  a  credit  of  one  hundred 
years,  the  interest  or  rent  to  be  paid  half  yearly,  at  the 
rate  of  seven  per  cent  on  the  amount  of  valuation.  Every 
ten  years,  the  purchasers  would  pay  to  the  sellers  a  value 
in  interest  equal  in  amount  to  the  value  of  the  whole  prop- 
erty of  the  nation.  If,  however,  the  property  were  sold 
upon  the  same  credit,  bearing  an  interest  of  one  per  cent, 
nearly  seventy  years  would  elapse  before  the  purchasers 
would  pay  to  the  sellers  an  amount  in  interest  equal  to  the 
value  of  the  principal. 


SECTION  XVII. 

BENEFICIAL  RESULTS  TO  LABORERS  AND  MERCHANTS   FROM 
THE  REDUCTION  OF  THE  RATE  OF  INTEREST. 

It  may  be  said  that  the  reduction  of  interest  on  money 
would  cause  property  to  rise  in  price  in  proportion  to  such 
reduction  of  interest,  and,  therefore,  the  condition  of  the 
laborer  would  not  be  improved.  But  whether  property 


161 


rise  or  fall,  or  maintain  its  present  price,  the  reward  of  la- 
bor would  be  equally  increased.  To  illustrate  this  posi- 
tion :  Suppose  H.  has  a  lot  that  cost  him  in  cash  $1,000, 
and  builds  a  house  upon  it  costing  $1,000 — together  worth 
$2,000.  Interest  on  money  is  at  six  per  cent  per  annum ; 
therefore,  to  make  the  property  worth  the  money  it  cost, 
H.  must  let  the  house  for  $120  a  year,  clear  of  insurance, 
repairs,  and  taxes.  Labor  is  then  at  one  dollar  per  day. 
Reduce  interest  on  money  to  one  per  cent,  and,  in  conse- 
quence of  this  reduction,  let  the  lot  and  house  rise  to  six 
times  their  former  price— that  is,  from  $2,000  to  $12,000. 
The  interest  on  $12,000  at  one  per  cent  would  be  $120, 
the  same  as  when  the  property  would  sell  for  but  $2,000. 
The  house  could  not  rise  from  $2,000  to  $12,000,  unless 
labor  should  rise  proportionally — that  is,  from  one  dollar 
a  day  to  six  dollars  a  day.  The  same  amount  of  labor 
would  as  readily  build  the  house  at  one  time  as  at  another. 
With  labor  at  six  dollars  per  day,  the  tenant  could  pay  the 
$120  rent  with  twenty  days'  work;  whereas,  with  interest 
at  six  per  cent,  and  labor  at  one  dollar  per  day,  it  would 
take  one  hundred  and  twenty  days'  labor  to  pay  the  rent, 
six  times  more  than  when  interest  on  money  was  at  one  per 
cent.  Now  suppose  the  change  in  interest  to  produce  no 
effect  upon  property,  and  the  house  and  lot  to  continue 
worth  only  $2,000.  The  interest  on  the  $2,000  at  one 
per  cent  would  be  $20.  If  property  did  not  rise,  labor 
would  not  rise,  because  it  would  require  the  same  number 
of  days'  labor  to  build  the  house,  and  it  would  take  twenty 
days'  labor  to  pay  the  rent — the  same  number  of  days 
that  it  would  if  the  property  should  rise  to  $12,000. 
A  just  per  centage  on  money  being  established,  the  rise 

21 


162 


or  the  fall  of  property  would  not  affect  the  relative  position 
of  labor  and  capital.  If  property  should  rise  in  price,  the 
tenant  would  not  be  obliged  to  build  another  house  for  the 
use  of  one,  any  sooner  than  if  property  should  fall  in  price. 
He  could  pay  the  rent  in  the  one  case  as  easily  as  in  the 
other,  and  with  the  same  amount  of  labor ;  but  a  change 
in  the  rate  of  interest  would  immediately  affect  him. 

The  amount  of  products  required  as  the  rent  of  land 
would  be  diminished  by  reducing  the  rate  of  interest.  Sup- 
pose G.  owns  a  farm  of  one  hundred  acres  of  well  improved 
land  worth  $100  per  acre.  H.  rents  this  farm  at  seven 
per  cent  interest  on  its  cost,  and  consequently  must  pay 
to  G.  $700  a  year.  If  the  land  produce  twenty-five  bushels 
of  wheat  to  the  acre,  and  wheat  be  worth  $1  per  bushel, 
H.  must  sow,  reap,  and  sell  the  products  of  twenty-eight 
acres,  and  pay  the  whole  proceeds  to  G.  as  the  rent  of  one 
hundred  acres  for  the  year.  If  interest  were  at  one  per 
cent  instead  of  at  seven,  the  rent  of  the  farm,  or  of  the 
$10,000  for  the  year,  would  be  $100,  instead  of  $700 ;  and 
H.  would  be  obliged  to  cultivate  and  sell  the  products  of 
four  acres  only  to  procure  one  hundred  bushels  of  wheat, 
or  $100  to  pay  the  rent.  If  he  performed  the  same  labor 
when  interest  was  at  one  as  when  it  was  at  seven  per 
cent,  he  would  retain  the  products  of  twenty-four  acres: — 
i.  e.,  six  hundred  bushels  of  wheat  as  the  surplus  earnings 
of  his  labor,  instead  of  paying  them  to  G.  for  the  use  of 
capital.  The  reduction  of  the  rate  of  interest  would  not 
lessen  the  quantity  of  products,  nor  decrease  their  value ; 
it  would  only  give  a  larger  proportion  to  producers.  If 
G.  should  cultivate  his  own  farm,  he  would  receive 
the  whole  of  its  products  as  the  earnings  of  his  labor, 


163 


whether  interest  were  at  one,  or  at  seven  per  cent  But 
if  interest  were  at  one  per  cent,  and  H.  should  rent  the 
second  farm,  G.  could  exact  but  a  small  proportion  of  the 
products  of  the  farm  as  rent.  G.  would  receive  a  more 
just  sum  for  the  use  of  the  farm,  and  H.  would  likewise 
receive  a  more  just  reward  for  his  labor  upon  it. 

A  low  and  uniform  rate  of  interest  would  have  a  most 
beneficial  effect  on  trade ;  and  of  this  the  following  is  a 
practical  illustration.  Suppose  a  merchant  in  the  city 
now  pays  $2,000  rent  for  his  store,  and  $800  for  his  house. 
His  rents  must  be  paid  from  the  profits  on  his  goods  be- 
fore he  can  gain  anything  for  his  own  support.  Reduce 
the  rate  of  interest  to  one  per  cent,  and  his  rents  would 
be  reduced  to  $400.  The  interest  on  his  stock  of  goods 
would  also  be  but  one-seventh  its  present  amount.  Esti- 
mate his  stock  at  $40,000,  and  the  interest  upon  it  at 
seven  per  cent  would  be  $2,800  a  year.  But  reduced  to 
one  per  cent,  the  interest  would  amount  to  but  $400.  The 
saving  of  interest  on  the  goods,  and  of  rents  on  the  house 
and  store,  would  amount  to  $4,800.  Suppose  the  mer- 
chant to  sell  $250.000  worth  of  goods  in  a  year,  he  must 
calculate  at  least  two  and  a  half  per  cent  for  guarantee  of 
bad  debts.  This  per  centage  would  be  $6,250.  Reduce 
interest  to  one  per  cent,  and  probably  it  would  not  be 
worth  a  tenth  of  one  per  cent  to  guarantee  the  debts.  In 
this  item,  there  would  be  a  clear  saving  of  $6,150.  Add 
the  $4,800  ;  there  would  be  saved  $10,950.  The  cost  of 
the  transportation  of  products  from  one  part  of  the  country 
to  another,  would  be  greatly  reduced;  because  the  per 
centage  to  be  paid  for  the  use  of  capital  to  make  in- 
ternal improvements  would  be  reduced  to  one  per  cent 


164 


All  this  difference  of  interest  would  be  gained  and  saved 
by  producers  and  distributers. 

That  a  low  rate  of  interest  would  drive  specie  from  the 
country,  is  a  false  supposition.  Do  the  lower  rates  of  in- 
terest in  England  drain  that  country  of  its  specie  ?  Does 
six  per  cent  interest  in  the  New  England  States  drive  their 
specie  into  the  Southern  and  Western  States,  in  which 
the  legal  interest  is  eight  per  cent  per  annum  ?  Such  is 
not  the  fact.  Where  interest  is  the  lowest,  money  and 
specie  are  the  most  abundant.  If  products  pay  a  profit  by 
shipment  to  England,  they  go  forward  rapidly  to  meet  the 
demand.  Not  so  with  money.  In  England,  money  is 
often  loaned  for  months  together  at  from  two  to  three  per 
cent  per  annum,  while  the  New  York  banks  lend  at  six  and 
seven  per  cent  per  annum.  For  years  past,  the  people  of 
the  United  States  have  paid  nearly,  or  quite  double,  the 
per  centage  for  the  use  of  money  that  has  been  paid  in 
England.  Why  does  not  money  from  England  flow  in 
and  supply  the  market,  so  as  to  equalize  the  rates  of  in- 
terest of  the  two  nations  ?  Why  do  the  States  which  pay 
the  highest  rates  of  interest  go  abroad  most  frequently  to 
borrow  money,  and  still  have  not  enough  ?  It  is  because 
the  rates  are  so  high  that  the  people  of  these  States  can- 
not produce  a  sufficient  surplus  to  pay  the  interest  to  cap- 
italists among  themselves,  and  to  other  States  where  the 
interest,  though  lower,  is  still  oppressive,  to  procure  the 
money  required  to  carry  on  their  business.  Money  is  a 
legal  representative,  and  serves  to  fix  an  income,  but  not 
to  produce  wealth.  Loan  it  twenty  or  thirty  times  where 
the  interest  is  high,  and  every  time  it  is  lent  it  makes  an 
income  for  the  lenders  for  a  longer  or  shorter  period, 


165 


which  impoverishes  the  borrowers,  because  they  must  sell 
their  products  to  pay  the  interest  The  principal  bor- 
rowed must  soon  be  returned  to  the  lenders  in  interest, 
and  the  interest  is  re-loaned  to  the  people.  These  high 
rates  of  interest  serve  to  make  the  people  paying  them 
tributary  to  a  few  money-lenders  among  themselves,  and 
other  States. 

In  the  United  States,  if  interest  were  reduced  to  one,  or 
to  one  and  one-tenth  per  cent,  useful  productions  would 
probably  increase  from  twenty-five  to  fifty  per  cent. 
Wealth,  instead  of  being  accumulated  in  a  few  hands, 
would  be  distributed  among  producers.  A  large  propor- 
tion of  the  labor  employed  in  building  up  cities  would  be 
expended  in  cultivating  and  beautifying  the  country.  In- 
ternal improvements  would  be  made  to  an  extent,  and  in  a 
perfection  unexampled  in  the  history  of  nations.  Agricul- 
ture, manufactures,  and  the  arts  would  flourish  in  every 
part  of  the  country.  Those  who  are  now  non-producers, 
would  naturally  become  producers.  Products  would  be 
owned  by  those  who  performed  the  labor,  because  the 
standard  of  distribution  would  nearly  conform  to  the  natu- 
ral rights  of  man. 


166 


SECTION  XVIII. 

THE     LOW     PRICES     OF     LABOR     IN     EUROPEAN     COUNTRIES 
NOT   CAUSED  BY  THEIR  LOW  RATES  OF   INTEREST. 

In  answer  to  the  principle  advanced,  that  the  establish- 
ment of  a  low  rate  of  interest  will  secure  a  better  com- 
pensation to  labor,  it  will  be  said  that  money  is  plenty  in 
all  old  countries,  at  a  low  rate  of  interest,  and  that  labor 
is  very  poorly  paid  ;  whereas,  in  new  countries,  in  which 
interest  is  always  high,  high  prices  are  paid  for  labor.  In 
England,  France,  and  Germany,  money  is  loaned  at  two, 
three,  four,  and  five  per  cent  per  annum,  and  in  all  these 
countries  the  prices  of  labor  are  very  low ;  while  in  the 
United  States  of  America,  in  which  the  lowest  legal  rate 
of  interest  is  six  per  cent,  and  the  average  rate  double  that 
of  European  nations,  the  prices  of  labor  are  also  double. 
In  former  ages,  the  rates  of  interest  in  these  now  old  coun- 
tries, were  very  high,  and  by  this  means  the  property  was 
early  accumulated  in  the  possession  of  a  few.  These  few 
owning  the  property,  and  letting  it  to  those  who  were  des- 
titute of  the  means  of  paying  the  rent  or  interest  except 
by  the  products  of  their  labor  on  the  property,  the  lenders 
could  no  Icfnger  collect  the  high  rates;  and  a  reduction 
of  interest  necessarily  followed,  because  laws  could  not 
enforce  the  collection  of  the  higher  rates,  where  the  ability 
to  pay  them  did  not  exist. 

As  a  general  thing,  emigrants  to  new  countries  are  in- 
dustrious and  enterprising  persons,  who  have  little  prop- 


167 


erty,  and  seek  a  new  home  because  they  have  not  the 
means  of  purchasing  farms,  &c.,  in  old  settlements.  If 
these  pioneers  hire  laborers  to  assist  them  in  clearing  and 
preparing  their  lands  for  use,  they  must  pay  higher  wages 
than  are  usual  in  older  countries,  for  the  laborers  have 
many  hardships  to  encounter.  The  first  settlers  import 
their  provisions  until  they  can  raise  a  crop.  The  new 
soil  produces  largely.  All  fresh  emigrants  being  com- 
pelled to  buy  provisions  until  they  can  raise  their  own, 
a  constant  market  is  afforded  for  the  surplus  products  of 
earlier  settlers,  and  they  are,  consequently,  able  to  pay 
good  prices  for  labor.  Emigrants  to  new  countries  raise 
the  principal  part  of  their  provisions,  but  depend,  in  a 
great  measure,  on  older  countries  for  clothing,  implements 
of  husbandry,  &c.  Their  products  are  consumed  among 
themselves ;  and  they  have  few,  if  any,  to  send  to  cities  or 
manufacturing  towns,  to  exchange  for  necessary  articles. 
They  must  send  money  to  buy  them ;  or,  if  they  purchase 
on  credit,  the  money  must  be  had  at  the  maturity  of 
the  debt.  This  drains  off  their  money.  Although  they 
make  great  improvements,  add  immensely  to  the  value  of 
their  land,  and  the  wealth  of  the  country  rapidly  increases, 
yet  money  is  very  scarce,  and  people  are  compelled  to 
contract  debts  for  clothing,  implements  of  husbandry,  &c. 
Any  one  who  has  money  to  lend  can  obtain  exorbitant 
interest,  and  those  who  are  in  debt  will  offer  high  rates  to 
their  friends  in  older  countries,  to  induce  them  to  loan 
their  money  in  the  settlement.  The  scarcity  of  money  is 
so  great,  that  capitalists  require  the  best  security  that  can 
be  offered,  to  quadruple  the  amount  of  their  loans.  In- 
terest accumulates  at  the  rate  of  ten,  twenty,  or  a  higher 

I 


168 


per  cent  per  annum,  and  this  rapidly  draws  property  into 
the  possession  of  capitalists.  Every  money-lender  thinks 
himself  justified  in  demanding  as  high  a  rate  of  interest  as 
his  neighbor.  When  mortgages  become  due,  property,  in 
many  cases,  is  sold  for  less  than  half  the  cost  of  the  labor 
to  make  the  improvements  upon  it.  The  holder  of  money 
can  buy  property  at  one-fourth  of  its  actual  value,  and 
another  who 'has  not  the  money  to  pay,  will  re-purchase 
it  at  a  large  advance,  paying  a  small  portion  down,  and 
agreeing  to  give  a  high  rate  of  interest  on  the  remainder. 
He  makes  what  is  termed  a  good  bargain  in  the  purchase. 
In  this  way  interest  is  maintained  at  enormous  rates. 
Lands  and  improvements  are  rapidly  concentrated  by 
capitalists. 

In  new  and  thinly  settled  countries,  where  fertile  lands 
are  at  low  prices,  the  people  do  not  starve,  even  when 
they  are  charged  ten,  twenty,  or  even  thirty  per  cent  per 
annum  on  borrowed  money  and  property ;  but  these  rates 
of  interest  concentrate  the  property  rapidly  into  the  hands 
of  a  few,  and  break  up  and  keep  hundreds  of  thousands  of 
laborers  poor.  They  can,  however,  generally  find  em- 
ployment by  which  they  can  obtain  their  food.  But  as 
countries  grow  older,  the  population  more  dense,  lands 
higher  in  price,  and  concentrated  in  fewer  hands,  the  me- 
chanical arts  begin  to  flourish,  and  manufactories  are  esta- 
blished, in  which  hundreds  of  workmen  labor  for  their 
daily  support.  The  manufactures  are  carried  on  by  indi- 
viduals, by  firms,  or  by  incorporated  companies.  If 
money  become  scarce,  and  interest  increase  to  double, 
treble,  or  quadruple  the  ordinary  rate,  the  prices  of  goods 
inevitably  fall,  the  wages  of  the  workmen  are  reduced,  and 


169 


great  numbers  are  thrown  out  of  employment.  The  de- 
mand for  goods  rapidly  decreases,  for  producers  generally 
have  become  impoverished,  and  are  unable  to  purchase 
their  usual  supplies,  and  many  of  them  must  subsist  by 
charity.  If  the  scarcity  of  money  and  the  high  rates  of 
interest  continue,  the  manufacturers  too  must  break ;  for 
to  pay  the  same  amount  of  debt,  they  must  sell  twenty- 
five  or  fifty  per  cent  more  of  their  goods  than  when  inter- 
est was  at  the  lowrer  rate. 

Although  the  rates  of  interest  in  all  old  countries  are 
much  lower  than  in  newer  countries,  yet  they  are  suffi- 
ciently high  continually  to  concentrate  wealth,  and  to  in- 
crease more  and  more  the  number  of  the  poor.  In  all  the 
old  countries,  the  established  rates  of  interest  are  high 
enough  to  concentrate  the  wealth  in  a  few  hands,  even  in 
a  new  country ;  not,  however,  so  rapidly  as  the  higher 
rates  of  interest  which  are  usually  paid  in  newer  countries. 

In  consequence  of  our  higher  rates  of  interest,  the 
property  of  the  United  States  is  concentrating  in  the 
hands  of  a  few  men  much  more  rapidly  than  in  older 
countries.  This  concentration  will  continue  until  the 
rates  of  interest  are  reduced  below  the  rates  obtained  in 
the  older  countries. 

The  fluctuations  of  the  rates  of  interest,  in  all  countries, 
render  it  difficult  to  offer  any  very  clear  illustrations  of 
their  bearing  upon  labor,  except  upon  general  principles. 
In  England,  the  rates  of  interest  vary  according  to  the 
necessity  of  the  borrower,  from  one,  two,  or  three  per 
cent  per  annum,  to  four,  five,  six,  seven,  eight,  nine,  ten, 
eleven,  and  twelve  per  cent ;  and  similar  variations  of  in- 
terest, though  at  much  higher  rates,  occur  in  our  own 

22 


170 


large  cities,  and  to  a  considerable  extent  in  our  towns  and 
villages.  Let  twelve  different  nations,  however,  fix  twelve 
different  rates  of  interest,  maintaining  the  rates  uniform, 
the  first  at  one  per  cent,  the  second  at  two  per  cent,  and 
so  on  to  twelve  per  cent,  and  the  concentration  of  wealth 
in  few  hands,  in  the  different  nations,  would  increase  in 
nearly  the  same  ratio  with  the  rates  of  interest.  The  ratio 
would  be  almost  exact,  except  for  the  profligacy  and  ex- 
travagance of  many  of  the  rich,  and  the  benevolence  of 
others.  This  general  principle  will  hold  good,  whether 
the  country  be  new,  rich,  and  fertile,  or  whether  it  be  old 
or  poor,  because  the  accumulation  is  according  to  the  rate 
per  cent.  A  copper  cent,  loaned  at  six  per  cent  interest 
per  annum,  will  double  its  principal  in  precisely  the  same 
time  that  a  gold  eagle,  at  the  same  rate  of  interest,  would 
double  its  principal.  It  is  a  mistaken  idea,  that  it  is  right 
to  pay  a  higher  rate  of  interest  in  a  new  and  fertile  coun- 
try, because  production  is  more  easily  made.  If  labor 
will  produce  a  greater  quantity  of  products,  capital  has 
no  right,  through  an  unjust  standard  of  accumulation,  to 
take  them  without  rendering  a  just  equivalent ;  but  if  the 
rate  of  interest  be  too  high,  it  will  inevitably  do  so.  There 
is  no  more  justice  in  increasing  the  rate  of  interest,  on 
account  of  the  facility  of  production,  than  there  would  be 
in  increasing  the  size  of  the  bushel,  because  labor  would 
produce  more  bushels  of  grain. 

In  all  ages  and  nations,  the  rates  of  interest  maintained 
have  been  so  high -as  continually  to  concentrate  the  wealth 
in  a  few  hands.  When  the  wealth  of 'a  nation  becomes 
thus  concentrated,  the  producers  and  distributers  who  are 
destitute  of  property,  are  compelled  to  borrow  money,  and 


171 


rent  property,  from  its  holders.  Then  every  few  years, 
there  is  a  general  breaking  up  ;  property  and  products  fall 
in  price,  and  the  difficulties  are  attributed  to  over-pro- 
duction, over-trading,  and  various  other  things,  instead  of 
to  the  real  cause,  which  is,  that  interest  has  been  running 
for  a  few  years,  and  has  nearly  absorbed  the  principal 
borrowed  or  rented,  and  left  the  people  destitute  of  the 
means  of  payment.  Suppose  the  whole  property  of  a  na- 
tion to  be  accumulated  in  the  possession  of  one  man,  (for 
this  shows  the  principle  more  strongly,)  then  all  other  in- 
dividuals would  be  compelled  either  to  buy  the  property 
on  credit,  or  to  rent  it.  If  he  should  charge  three  per 
cent  per  annum  on  the  money  or  property,  it  could  hardly 
fail  to  keep  nineteen-twentieths  of  the  people  in  perpetual 
poverty.  Although  for  a  few  years  they  might  appear  to 
be  prosperous,  yet  no  prosperity  could  possibly  be  perma- 
nent, because  the  rent,  or  interest,  would  certainly  absorb 
more  than  the  people  could  earn.  A  rate  of  interest  of 
even  two  per  cent,  would  produce  the  same  periodical 
seasons  of  depression,  although  they  would  not  be  so  fre- 
quent, nor  have  so  paralyzing  an  effect,  because  there 
would  be  many  more  owners  of  property,  and  the  general 
indebtedness  of  the  people  not  nearly  so  great,  as  it  is  at 
the  higher  rates  of  interest.  It  cannot  then  be  true,  that 
the  low  rates  of  interest  maintained  in  the  old  countries, 
are  the  cause  of  the  low  prices  of  labor,  and  the  poverty 
of  producers,  but  on  the  contrary,  the  former  high  rates  of 
interest  concentrated  property-  in  a  few  hands,  and  the 
present  rates  of  interest  are  sufficiently  high  to  continue 
the  concentration,  and  prevent  the  reward  of  labor.  High 


172 


rates  of  interest  have  been,  and  are,  the  cause  of  the  pov- 
erty of  producers  in  all  nations. 

In  England,  by  the  average  rate  of  three  per  cent  inter- 
est, the  labor  is  compelled  to  double  the  entire  capital  of 
the  nation,  in  the  hands  of  its  holders,  in  twenty-three  and 
a  half  years,  besides  which,  the  laborers  must  furnish  their 
own  support.  But  this  is  not  the  only  cause  of  the  de- 
pression of  labor  in  Britain.  An  enormous  sum  of  money 
was  borrowed  by  the  government  of  its  wealthy  citizens, 
and  expended  in  wars.  This  National  Debt  amounts  to 
about  $4,000,000,000,  the  annual  interest  on  which,  at  an 
average  of  three  per  cent,  is  $120,000,000,  which  the 
people  must  pay  by  an  annual  taxation  of  their  products. 
Labor  receives  no  benefit  from  it.  The  money  is  not  in- 
vested in  land,  nor  in  anything  else  of  which  the  labor  has 
the  use  by  the  annual  payment  of  the  interest.  This  in- 
terest on  the  National  Debt  is  additional  to  the  too  high 
rate  of  interest  already  charged  on  all  the  capital  actually 
employed. 

It  is  commonly  supposed  that  the  land-owners  of  Eng- 
land are  the  oppressors  of  the  toiling  multitude.  The 
power  to  lease  land,  at  the  present  rates,  is  given  by  law, 
by  fixing  the  present  rates  of  interest  on  money.  The 
oppression  by  loaning  money,  however,  is  greater  than 
that  by  leasing  land,  because  the  rates  of  interest  on 
money  are  continually  fluctuating,  and  the  oppression  of 
the  producing  classes,  by  its  power,  being  indirect,  can  be 
made  greater.  The  income  of  the  holder  of  English  gov- 
ernment securities  is  earned  by  the  operatives  in  the 
mines  and  the  factories,  and  by  the  seamstresses  and  va- 


173 


rious  workwomen  in  the  cities.  But  the  bond  holder 
comes  in  direct  contact  with  none  of  these.  His  income 
is  paid  by  the  government,  which  gathers  it  from  every 
branch  of  industry  in  the  country  by  grievous  taxations. 
Does  it  not  beggar  the  producing  classes  to  pay  the  in- 
terest to  the  money-owner,  as  much  as  to  pay  the  rent 
to  the  land-owner  ?  Are  the  operatives  in  the  manufae- 
ories  and  mines  any  better  provided  for  than  the  laborers 
on  the  soil  ?,  Overgrown  landed  estates  have  generally 
been  acquired  through  exorbitant  interest  on  money. 
The  only  way  to  eradicate  the  oppression  caused  by 
holding  them  at  high  rents,  is  to  reduce  the  interest  upon 
money  to  such  a  rate  that  the  products  of  labor  will 
legally  go  to  those  who  perform  the  labor,  instead  of 
going  to  the  owners  of  capital. 

The  laws  of  the  British  government,  respecting  money, 
as  much  compel  the  producing  classes  to  toil  for  capi- 
talists, as  the  laws  of  our  Southern  States  compel  the 
slave  to  work  for  his  master.  The  former  work  harder, 
and  from  a  quarter  to  a  third  more  hours  than  the  latter  ; 
and  then  are  neither  as  comfortably  fed  and  clothed,  nor 
as  much  cared  for  by  those  who  reap  the  reward  of  their 
labor.  The  slave  is  legally  the  property  of  his  master.  In 
sickness,  the  master  provides  him  with  medical  aid,  and 
supports  him  when  age  renders  him  unable  to  work.  If 
there  be  no  higher  motive,  the  interest  of  the  master  will 
induce  him  to  attend  to  the  preservation  of  the  life  and 
health  of  his  dependants.  Not  so  with  the  employers  and 
operatives  in  the  mines  and  manufacturing  establishments 
of  England.  When  the  operatives  are  in  health  and  have 


174 


full  employment,  I  doubt  whether  they  have  more  of  the 
comforts  of  life  than  the  generality  of  Southern  slaves. 
And  when  sick  or  unable  to  work,  their  situation  is  far 
( more  deplorable.  During  suspensions  of  business,  we  have 
heard  of  the  starvation  of  those  who  would  gladly  work  ; 
but  I  do  not  remember  an  instance  in  which  a  slave,  even 
when  old,  has  been  starved  by  his  master.  There  may  be 
such  instances,  but  they  are  not  like  the  former,  of  fre- 
quent occurrence.  The  master  is  bound  by  his  own  in- 
terest, and  by  law,  to  provide  for  the  slave.  But  the 
moneyed  or  landed  capitalist  is  bound  neither  legally,  nor 
by  his  interest,  to  provide  for  the  laborer.  His  capital  is 
at  his  own  disposal,  and  the  laborer's  capital,  or  ability  to 
labor  is  also  at  his.  Stern  necessity,  however,  compels 
the  latter  to  toil,  for  otherwise  he  must  starve.  If  he  die 
of  want,  his  loss  is  not  felt  by  his  employer.  His  place  is 
eagerly  filled  by  another,  equally  destitute.  Every  dollar 
that  passes  into  the  hands  of  the  receiver  of  interest,  is 
representative  of  products,  and  all  the  excess,  above  a  just 
rate  of  interest,  is  taken  from  the  rightful  earnings  of  the 
laborer.  The  master  takes  the  earnings  of  the  slave  di- 
rectly ;  the  capitalist  takes  the  earnings  of  the  laborer  indi- 
Tectly.  Without  the  intervention  of  the  government, 
"Which  collects  the  interest  by  various  taxations,  so  that 
the  means  of  oppression  are  somewhat  concealed,  the 
people  would  refuse  to  submit  to  the  injustice,  and  revolu- 
tion in  this  system  would  naturally  follow. 

If  the  national  rate  of  interest,  in  Britain,  on  all  bank 
and  private  loans,  and  on  the  National  Debt,  were  reduced 
to  one  per  cent,  and  the  interest  were  regularly  paid,  the 


175 


bonds  of  the  government  would  always  be  at  par.  A  hun- 
dred pounds  of  the  National  Debt  would  be  worth  as 
much  as  a  hundred  pounds  in  coin,  or  a  hundred  pound 
note  of  the  Bank  of  England.  Now  this  bank  and  private 
bankers  continually  vary  the  rates  of  interest.  At  some 
periods  they  charge  two,  three,  or  four  times  more  than 
at  others,  while  the  bonds  of  the  government  bear  a  regu- 
lar rate  of  interest.  Therefore,  when  the  bank  and 
branches  lend  at  a  low  rate,  the  government  securities  rise 
in  price ;  and  when  they  lend  at  very  high  rates,  the  gov- 
ernment bonds  depreciate. 

Suppose  the  interest  on  the  National  Debt  were  reduced 
from  three  to  one  per  cent  per  annum.  This  simple  pro- 
cedure would  save  to  the  laboring  classes  eighty  millions 
of  dollars  worth  of  their  products.  If  interest  on  loans  of 
money  by  the  Bank  of  England,  capitalists,  and  brokers 
were  reduced  to  one  per  cent,  it  would  increase  the  saving 
to  the  laboring  classes  to  some  two  or  three  hundred  mil- 
lions annually.  The  per  centage  income  upon  capital  can 
only  be  paid  with  the  proceeds  of  labor ;  therefore,  this 
reduction  of  the  per  centage  income  would  be  equiralent 
to  the  distribution  of  this  large  sum  of  two  or  three  hun- 
dred millions  among  the  laboring  classes,  according  to  the 
labor  performed.  The  effect  of  so  large  an  annual  distri- 
bution among  this  class  would  tye  to  diffuse,  in  a  few  years, 
competence  and  happiness  where  now  exist  only  poverty 
and  misery. 

The  maintenance  of  a  rate  of  interest  of  one,  or  some 
other  per  centage  lower  than  this,  would  soon  and  forever 
end  the  periodical  depressions  of  trade,  of  labor,  and  of 
the  prices  of  products,  and  the  general  oppression  of  the 
laboring  classes. 


CHAPTER   IV. 
THE  BANKING    SYSTEM. 

SECTION  I. 

THE  NATURE  OF   BANKS,  THEIR   INSTITUTION,  AND   THE 
PRINCIPLES  BY  WHICH  THEY  ARE  GOVERNED. 

BANKS,  like  other  incorporated  companies,  receive  their 
chartered  powers  by  legislative  enactments.  These  char- 
ters make  it  incumbent  upon  the  banks  to  divide  their 
gains  in  dividends  to  their  stockholders,  and  to  report  to 
the  legislature  yearly,  or  oftener,  their  situation  and  stand- 
ing. It  is  presumed  that  the  publishing  of  these  dividends, 
and  of  the  reports  to  the  legislatures,  will  keep  the  people 
informed  of  the  doings  and  utility  of  the  banks.  Yet  the 
practical  operations  of  banking,  and  their  special  and  gen- 
eral influences  for  good  or  for  evil,  are  hidden  from  the 
public  view.  Causes  are  felt  to  be  in  operation  which  the 
people  cannot  comprehend — the  changes  of  the  market 
value  of  property,  and  the  prices  of  labor,  are  accounted 
for  by  the  abundance  and  scarcity  of  money ;  but  why 
money  is  scarce  at  one  time,  and  abundant  at  another,  is 
to  the  great  body  of  the  people  utterly  unknown. 

It  is  the  intention  of  the  author  to  place  the  institution 
and  operation  of  our  Banking  System  fairly  before  the  pro- 
ducers of  the  nation,  that  its  effects  upon  their  interests 
may  be  clearly  understood.  Producers  themselves  will 


177 

then  determine  whether  they  will  change  the  system  for 
one  to  be  established  on  right  principles,  that  will  act  for 
the  good  of  all — or  continue  the  present  one,  the  effect  of 
which,  for  ages,  in  this  and  other  countries,  has  been  to 
accumulate  wealth  in  the  hands  of  a  few,  to  the  constant 
injury  and  hopeless  poverty  of  the  many. 

The  Constitution  of  the  United  States  declares,  Act  L, 
Sec.  X. — "  No  State  shall  emit  bills  of  credit,  make  any- 
thing but  gojd  and  silver  coin  a  tender  in  payment  of 
debts."  A  bill  of  credit  is*  a  representative  of  property 
A  bank  bill  is  a  bill  of  credit ;  it  is  taken  for  the  amount 
of  value,  or  property,  set  forth  upon  its  face — and  if  it  does 
not  actually  represent  that  value,  the  owner  must  suffer 
loss. 

The  General  Government  has  reserved  to  itself  the 
right  to  coin  money  and  emit  bills  of  credit.  It  has,  at 
least  impliedly,  assumed  the  obligation  to  provide  a  rep- 
resentative of  the  property  of  the  people  to  the  extent  re- 
quired. It  has,  however,  neglected  to  supply  the  neces- 
sary kind  and  quantity  of  money  to  effect  those  exchanges 
essential  to  the  interest  and  welfare  of  all  civilized  com- 
munities. The  consequence  has  been  an  attempt  of  the 
State  governments  to  supply  the  deficiency  by  the  institu- 
tion of  banks.  The  mode  of  instituting  banks  has  been 
various — but  however  instituted,  experience  has  shown 
both  their  unfitness  to  fulfil  the  public  purposes  of  their  in- 
stitution, and  also  their  unequaled  power  as  instruments 
for  gathering  the  earnings  of  labor  to  capital,  without  any 
adequate  return. 

The  nature  of  banks  is  sometimes  said  to  be  similar  to 
that  of  manufacturing  companies.  It  may  be  well  to  re- 

23 


178 

mark  their  resemblances  and  their  differences.  The  chief 
point  of  resemblance  in  their  constitutions  is,  that  the 
stockholders,  both  in  manufacturing  companies  and  in 
banks,  are  bound  only  for  the  amount  paid  in  as  capital 
stock,  and  are  not  liable  for  any  further  debts  of  the  insti- 
tutions. In  this  particular  they  are  on  the  same  footing. 
But  in  other  respects  they  differ  widely.  Banks  are  char- 
tered in  order  to  furnish  the  people  with  a  representative 
of  value,  or  a  currency  by  which  their  soil  and  products 
may  be  exchanged.  Manufacturing  companies  are  char- 
tered in  order  to  facilitate  the  manufacture  of  cloth,  or  of 
other  useful  articles  for  the  support  and  comfort  of  man. 
Banks  deal  in  representatives  of  property,  and  the  interest 
on  these  representatives  is  the  source  of  their  gains. 
Manufacturers  gain  by  increasing  the  amount  of  actual 
products.  Combinations  of  machinery  diminish  the  ex- 
pense of  producing  useful  articles.  Still,  although  manu- 
facturing companies  may  have  an  equal  amount  of  capital 
with  banks,  say  frqm  $100,000  to  $2,000,000,  yet  any  man 
may  manufacture  articles  made  by  companies,  or  any 
number  of  men  may  combine  for  the  same  purpose,  with- 
out a  charter  or  any  other  legislative  authority.  They 
have  as  much  right  to  sell  their  articles  in  market  as  char- 
tered companies.  If  banking  institutions  and  manufac- 
turing companies  be  of  the  same  nature,  why  do  not  legis- 
latures allow  individuals,  however  small  their  capital,  to 
manufacture  and  circulate  their  notes  as  money,  as  well 
as  to  allow  individuals  to  manufacture  goods  and  sell  them 
to  any  one  who  will  purchase  them  ?  Why,  too,  do  they 
limit  the  amount  of  business  that  banks  may  transact,  and 
leave  manufacturing  companies  to  be  governed  by  the  dis- 


179 


cretion  of  their  directors  ?  If  bank-notes  be  merchandise, 
why  not  allow  banks  to  sell  their  notes  for  other  merchan- 
dise, instead  of  loaning  them  for  an  interest  in  money  ? 
Why  do  legislatures  limit  the  interest  that  banks  may 
charge  for  the  use  of  their  bank-notes,  more  than  they 
limit  the  prices  of  goods  manufactured  by  chartered  com- 
panies ?  It  is  because  the  notes  issued  by  banks  are 
made  a  public  medium  of  exchange  for  all  property,  even 
for  the  goods  of  chartered  manufacturing  companies,  that 
their  quantity,  and  the  interest  upon  them,  are  legally  re- 
stricted. It  is  true  that  legislative  action  has  thus  far  ac- 
complished very  little  towards  the  regulation  of  a  currency ; 
but  these  restrictions  upon  it,  and  the  necessity  for  legal 
authority  to  create  it,  prove  that  its  character  is  regarded 
as  not  merchandise. 

According  to  our  present  laws,  to  establish  a  bank,  the 
parties  who  are  desirous  of  banking  petition  their  State 
government  for  a  charter  granting  to  them  the  privilege. 
The  petition  states  that  the  bank  is  needed  by  the  public, 
yet  we  shall  see  presently  that  it  is  not  only  for  private 
purposes',  but  that  it  is  to  be  conducted  solely  for  the  benefit 
of  the  stockholders.  The  charter,  according  to  law,  requires 
the  parties,  or  the  stockholders,  to  furnish  a  certain  amount 
of  money,  which  constitutes  the  capital  stock  of  the  bank. 
When  the  stock  is  paid  in,  the  bank  becomes  an  office  of 
discount  and  deposit,  and  is  authorized  by  its  charter  to 
issue  and  loan  bank-notes  to  circulate  as  money.  In  the 
State  of  New  York  the  banks  are  authorized  to  discount 
two  and  a  half  times  the  amount  of  their  capital.  For 
instance,  if  the  stockholders  pay  in,  say  one  million  of 
dollars  as  capital  stock,  the  bank  is  at  liberty  to  discount 


180 


or  loan  out  to  the  people  two  and  a  half  millions  of 
dollars.  Without  a  bank  charter,  the  men  who  own  the 
million  of  money,  which  constitutes  the  capital  of  the 
bank,  could  loan  only  one  million  of  dollars.  In  granting 
the  charter,  the  legislature  grants  to  these  few  individuals 
the  privilege  of  charging  the  people  seven  per  cent  inter- 
est on  one  and  a  half  millions  of  dollars  never  owned  by 
the  stockholders.  The  bank  issues  bank-notes  bearing  no 
interest,  and  exchanges  them  for  the  endorsed  notes  of  the 
people,  bearing  interest.  The  bank  gains  the  interest  for 
the  use  of  the  bank-notes. 

[Money  is  popularly  said  to  bear  such  a  rate  of  interest, 
as  if  the  money  itself  bore  the  interest.  But,  in  fact, 
money  bears  no  interest ;  the  obligations  given  for  the  use 
of  money  bear  the  interest ;  for  when  money  circulates  in 
making  cash  purchases  of  commodities  and  property,  in 
which  no  obligations  are  given,  there  is  no  interest  paid.] 

The  bank  pays  no  interest  upon  the  money  deposited  in 
it,  and  charges  interest  on  all  the  endorsed  notes  given  in 
exchange  for  bank-notes  taken  from  it.  The  interest  upon 
one  and  a  half  millions  of  dollars'  worth  of  endorsed  notes, 
at  seven  per  cent,  amounts  to  one  hundred  and  five  thou- 
sand dollars  a  year.  This  sum  of  interwt  is  paid  on  a 
capital  which  is  entirely  fictitious,  so  far  as  the  bank  is 
concerned.  If  there  be  any  capital  furnished  for  this  one 
and  a  half  millions  of  dollars,  it  is  furnished  by  the  en- 
dorsed notes  that  the  people  give  in  exchange  for  the 
bank-notes.  The  solvency  of  the  bank  for  one  and  a  half 
millions,  depends  upon  the  goodness  of  the  endorsed  notes 
received  from  the  people,  and  not  upon  its  own  capital ; 
for  however  safely  its  one  million  of  capital  may  be 


181 


loaned,  it  can  redeem  jjut  one  million  of  liabilities.  If  the 
bank  should  lose  a  million  of  dollars  by  bad  debts,  or 
otherwise,  the  redemption  of  the  balance  of  the  $2,500,000, 
i.  e.,  $1,500,000,  would  depend  entirely  upon  the  security 
furnished  by  the  endorsed  notes  of  the  people.  If  only 
$1,000,000  were  lost,  the  entire  loss  would  fall  upon  the 
stockholders,  for  this  amount  is  comprised  in  the  capital 
of  the  bank ;  and,  by  the  charter,  is  made  first  liable  for 
the  losses  which  may  be  sustained.  But  the  remaining 
$1,500,000  of  bank-notes  loaned  could  not  be  redeemed 
unless  the  endorsed  notes  given  by  the  people  in  exchange 
for  the  bank-notes  were  against  persons  able  to  pay  them. 
If  the  people  were  able  to  pay  only  a  part  of  these  notes, 
then  only  a  part  or  a  certain  per  centage  of  the  bank-notes 
could  be  paid ;  and,  if  no  part  of  the  endorsed  notes  could 
be  collected,  the  million  and  a  half  of  bank-notes  would  be 
a  total  loss  to  the  holders. 

The  original  $1,000,000  of  capital  has  little  basis  of 
specie,  and  the  surplus  $1,500,000,  issued  over  and  above 
the  capital,  has  none.  It  is  based  upon  a  privilege  granted 
by  the  government  to  a  company  of  men  to  make  bank- 
notes bearing  no  interest,  and  exchange  them  for  the  en- 
dorsed notes  of  the  people  bearing  interest.  True,  all 
bank-notes  are  made  payable  on  demand  in  specie,  and  if 
banks  refuse  to  pay  specie  they  are  liable  to  forfeit  their 
charters.  All  obligations  between  individuals,  even  to 
book-accounts,  are  legally  payable  in  specie,  as  much  as 
bank-notes ;  all  debtors  are  liable  to  prosecution  if  they 
refuse  to  pay  their  debts  in  specie.  The  law  which  re- 
quires banks  to  redeem  their  notes  on  demand  in  specie, 
does  not  furnish  them  with  specie  for  that  purpose  more 


182 

than  it  furniShes  individuals  with  ^pecie  to  redeem  their 
notes,  and  to  pay  their  debts.  'Nearly  three  times  the 
whole  amount  of  specie  in  the  banks  in  the  State  of  New 
York,  from  1835  to  1845,  would  have  been  required  to  pay 
their  deposits,  at  any  one  time  during  that  period  without 
redeeming  in  specie  one  circulating  bank-note.  If  specie 
should  be  generally  demanded,  the  laws  could  not  enable 
the  banks  to  pay  their  notes  and  deposits  in  coins,  nor 
individuals  to  pay  their  notes  and  debts  in  coins. 

The  principle  upon  which  the  contracts  between  banks 
and  the  people  are  made,  may  be  illustrated  by  supposing 
the  government  to  fix  a  value  upon  ten  silver  spoons  be- 
longing to  John  Doe,  and  make  them  a  tender  in  payment 
of  debt.  As  they  are  not  sufficient  in  amount  to  form  a 
currency,  John  Doe  is  empowered  to  make  twelve  paper 
spoons  for  each  silver  one,  all  of  which  paper  spoons  are 
made  payable  on  demand  in  silver  spoons.  He  retains  the 
ten  silver  spoons,  and  loans  at  seven  per  cent  interest  the 
one  hundred  and  twenty  paper  spoons  which  he  has  made 
on  the  credit  of  the  silver  spoons.  He  charges  interest 
upon  the  paper  spoons  which  he  loans,  and  receives  in  ex- 
change for  them  good  endorsed  notes  payable  in  two,  three, 
or  four  months  in  silver  spoons.  All  the  paper  spoons 
loaned  to  the  people  are  payable  in  silver  spoons  on  de- 
mand at  John  Doe's  office,  who  has  but  ten  silver  spoons 
to  pay  the  one  hundred  and  twepty  paper  ones.  If  the 
holder  of  ten  paper  spoons  should  demand  and  take  the 
ten  silver  spoons,  John  Doe  would  be  obliged  to  make  the 
endorsed  notes  which  he  had  received  from  his  customers 
for  paper  spoons  redeem  the  remaining  one  hundred  and 
ten  paper  spoon  notes.  All  these  were  based  upon  paper, 


183 


and  must  be  paid  again  in  paper  if  they  are  paid  at  all.  Still, 
he  would  receive  from  the  people  interest  upon  a  hundred  and 
ten  silver  spoons  which  he  never  owned,  and  this  by  means 
of  a  legislative  charter  granted  to  him  because  he  was  the 
owner  of  ten  silver  spoons.  If  the  legislature  would  not 
sanction  the  balancing  of  these  debts  with  paper,  the  peo- 
ple could  never  pay  Doe  in  silver  spoons  the  endorsed  notes 
they  owed  him ;  nor  would  Doe  be  able  to  redeem  his  pa- 
per spoon  notes  by  silver  spoons.  Neither  the  people  who 
owe  him  the  notes  have  silver  spoons  to  pay  him,  nor  has 
he  any  with  which  to  pay  his  spoon  bank-notes.  The  drawer 
of  the  ten  silver  spoons  would  engross  the  whole  tender 
upon  which  all  the  contracts  were  based. 

In  general,  debts  are  contracted  for  land,  labor,  and  pro- 
ducts ;  but  none  of  these  is  a  tender  in  payment  for  debts. 
Debts  are  payable  in  a  tender  established  by  law,  but 
are  generally  paid  in  bank-notes  which  are  used  as  a  sub- 
stitute for  the  tender.  Admitting,  then,  the  silver  dollar 
to  possess  intrinsic  value  equal  to  its  nominal  amount, 
how  is  it  possible  for  it  to  make  twelve  representatives  of 
itself,  and  make  each  one  of  the  twelve  as  valuable  as 
itself,  when  at  the  same  time  any  one  of  the  twelve  has. 
power  to  demand  and  take  the  silver  dollar,  and  thus  to 
leave  eleven  destitute  of  any  basis  of  silver,  and  incapable 
of  being  paid  in  it  ? 

If  paper  money  be  allowed  to  pass  as  representative  of 
specie,  there  should  be  a  silver  dollar  for  every  paper  dol- 
lar. Otherwise,  the  paper  money  cannot  represent  specie. 
A  silver  dollar  cannot  be  represented  by  two  paper  dollars, 
each  of  which  would  be  as  valuable  as  itself,  more  than 
the  owner  of  one  acre  of  land  can  give  two  deeds,  each 


184 


for  the  one  acre,  to  different  individuals,  and  make  both 
deeds  good,  when  he  has  but  one  acre  of  land  to  satisfy 
both.  The  first  deed  must  take  the  entire  acre.  If  the 
second  were  of  any  value,  it  must  be  made  so  by  offsetting 
the  consideration  given  in  payment  for  the  deed,  and  not  the 
land  which  the  deed  purported  to  secure.  If  paper  money  be 
allowed  to  circulate,  it  should  not  be  under  the  pretence 
that  it  represents  what  it  does  not  and  cannot  represent. 

In  April,  1838,  the  State  of  New  York  passed  a  Gene- 
ral Banking  Law,  allowing  any  number  of  individuals  to 
associate  together  and  establish  a  bank,  provided  they 
furnish  a  capital  of  not  less  than  $100,000.  To  secure  the 
public  from  loss  by  the  issue  of  bank-bills  under  this  law, 
the  bank  deposits  with  the  Comptroller  an  amount  in  bonds 
and  mortgages,  or  State  stocks,  equal  to  the  amount  of 
bank-bills  which  it  is  authorized  to  issue.  The  bills  are 
then  countersigned  by  the  Comptroller.  If  the  bank  fail 
to  redeem  the  bills,  the  Comptroller  is  empowered  to  sell 
the  bonds,  and  redeem  the  bills  with  the  proceeds. 

This  mode  of  supplying  the  public  with  money  is  deem- 
ed by  many  a  very  safe  one.  Still,  during  the  first  six  or 
seven  years  which  this  new  system  was  in  operation  thirty- 
four  banks  failed,  and  did  not  redeem  their  notes  at  par. 
Some  paid  only  twenty-five  or  thirty  cents  on  the  dollar. 
Others  paid  a  per  centage  varying  from  thirty  to  ninety-four 
cents.  Of  forty  banks  closed  by  the  Comptroller,  only  six- 
redeemed  their  circulation  at  par.  At  the  time  of  the 
Comptroller's  sale  of  the  securities  given  for  the  redemption 
of  their  bank-notes,  the  forty  banks  had  a  circulation  of 
81,233,374.  The  circulation  of  the  six  banks  of  which  the 


185 


notes  were  finally  redeemed  at  par  by  the  Comptroller 
amounted  to  $120,729,  leaving  a  balance  of  circulation  of 
$1,112,645,  which  was  compromised  at  rates  varying  from 
twenty-five  to  ninety-four  cents  on  the  dollar.  Doubt- 
less, a  large  amount  of  these  notes  were  bought  up  by 
brokers  at  a  much  greater  discount  than  that  at  which  they 
were  eventually  redeemed  by  the  Comptroller,  so  that  the 
public  lost  probably  from  $700,000  to  $800,000,  besides 
the  losses  of  depositors  which  do  not  appear. 

It  may  be  said  that  the  securities  placed  with  the  Comp- 
troller were  not  the  bonds  of  the  State  of  New  York,  but 
those  of  other  States  ;  that  these  States  failed  to  pay  their 
interest,  and  consequently  their  bonds  depreciated  greatly 
below  their  par  value,  and  were  not  good  security.  True, 
but  at  the  time  they  were  taken  by  the  Comptroller,  they 
were  deemed  good  security  for  the  redemption  of  the  bank- 
notes. It  must  be  remembered,  too,  that  in  1837  the  bonds 
of  the  State  of  New  York,  bearing  an  interest  of  six  per 
cent,  sold  at  about  thirty  per  cent  below  their  par  value. 
The  securities  pledged  with  the  Comptroller  at  the  present 
time  are  of  the  same  nature  as  those  then  pledged.  If  the 
interest  on  money  should  now  rise  as  high  as  then  obtained 
on  loans  of  bank-notes,  the  bonds  of  the  State  would  again 
depreciate  below  their  par  value  as  much  as  in  1837.  The 
same  loss  of  confidence  in  the  ability  of  the  State  to  pay 
its  debts  would  exist,  because  rates  of  interest  at  two,  three, 
and  four  per  cent  a  month  so  rapidly  increase  the  indebt- 
edness of  the  people,  that  their  wealth  is  soon  transferred 
to  a  few  capitalists,  who  are  enabled  to  control  the  rate 
of  interest,  and  consequently  the  market  value  of  State 
bonds  and  property.  As  long  as  money  may  be  obtained 

*- 


186 


on  good  securities  at  six  or  seven  per  cent  interest  per 
annum,  the  bonds  of  the  State,  bearing  six  per  cent  inter- 
est, will  command  at  least  their  par  value.  Only  so  long 
as  banks  and  capitalists  choose  to  keep  the  rate  of  inter- 
est as  low  as  six  or  seven  per  cent,  will  these  State  bonds 
continue  safe  for  the  redemption  of  the  bank-bills. 

We  will  now  see  by  whom  the  security  of  this  banking 
capital  is  furnished,  and  by  whorr^  the  interest  upon  it  is 
paid.  In  order  to  provide  capital  for  a  bank,  the  individual 
who  desires  to  establish  the  institution  must  buy  State 
bonds  to  secure  the  bank-notes  which  he  intends  to  issue. 
He  invests  $100,000  in  bonds,  on  which  the  people  pay  him 
six  per  cent  interest.  Although  his  money  is  invested,  yet 
he  receives  $100,000  in  bank-notes,  countersigned  by  the 
Comptroller,  upon  which  he  is  authorized  to  bank.  Add- 
ing a  few  thousand  dollars  in  specie  to  his  bank-notes,  he 
opens  an  office  of  discount  and  deposit,  loans  out  the 
$100,000  in  bank-notes,  which  he  received  from  the 
Comptroller,  and  perhaps  $100,000,  or  $150,000  more 
received  from  the  people  in  deposit,  on  which  he  pays  no 
interest.  He  charges  interest  on  all  the  money  he  lends. 
If  the  people  should  call  upon  him  to  redeem  his  bank- 
notes, and  pay  their  deposits  in  specie,  he  would  probably 
not  have  more  than  $10,000,  $20,000,  or  $30,000  in  spe- 
cie ;  and  if  there  should  be  a  run  upon  the  bank,  this 
would  not  meet  the  demand  for  a  single  day.  The  banker 
would  be  compelled  to  suspend  specie  payments.  What 
would  then  secure  the  remaining  indebtedness  of  the  bank 
except  the  endorsed  notes  of  the  people,  and  the  State 
bonds,  for  which  the  people  are  responsible  ?  The  banker 
is  not  liable  beyond  the  capital  invested.  He  loans  his 
money  on  securities  furnished  by  the  property  of  others. 


187 

The  object-of  this  Banking  Law  was  the  security  of  the 
bank-notes.  This  object,  as  we  have  shown,  has  not  been 
realized.  The  people  have  not  only  lost  $700,000  or 
$800,000  by  the  failure  of  the  banks  to  redeem  their  notes, 
but  the  depositors  also  have  lost  large  amounts.  Deposits 
in  a  public  banking  institution  should  be  .as  secure  as  the 
bank-notes  circulated ;  but  for  these  no  provision  is  made 
by  the  law.  Bankers,  under  the  sanction  of  the  General 
Banking  Law,  obtain  an  interest  from  the  people  on  two 
or  three  times  more  property  than  they  actually  own. 
This  law,  as  also  all  other  laws  granting  banking  privileges, 
creates  a  fictitious  capital  for  which  the  people  are  com- 
pelled to  pay  interest  five  or  six  times  greater  than  they 
can  afford  for  real  capital  and  justly  reward  labor.  It  has 
operated  to  enrich  bankers  and  capitalists,  instead  of  ope- 
rating for  the  benefit  of  the  people. 


SECTION  II. 

OF  THE  AMOUNT  OF  SPECIE  OWNED  BY  BANKS,  AND  THE 
INTEREST  PAID  BY  THE  PEOPLE  ON  THEIR  ISSUES  AND 
LOANS. 

We  will  now  estimate?  the  proportion  of  capital  stock 
furnished  in  specie  by  the  stockholders  of  the  banks  in  the 
State  of  New  York,  and  the  proportion  furnished  by  the 
balancing  power  of  paper  against  paper.  The  following 
table,  taken  from  the  State  Register,  shows  how  much  of 
our  present  currency  is  based  upon  specie,  and  how  much 
is  based  upon  paper  notes : — 


188 


BANK  REPORTS  FOR  1844-45. 

COMPARISON  OF  THE  PRINCIPAL   ITEMS,  AT  QUARTERLY   PERIODS,   FROM  FEBRUARY,  1844,   TC 
FEBRUARY,  1845,  INCLUSIVE. 

February  1,  May  1,  August  1,  November  1,  February  1, 

1844.  1844.                  1844.  1844.  1845. 

Capital $43,649,887  $43,462,311  $43,443,005  $43,618,607  $43,674,146 

Circulation 16,335,401  18,365,031  18,091,324  20,152,219  J8,513,402 

Canal  Fund 1,483,843  1,506,167       1,210,794  1,534,553  1,607,572 

Deposits 29,026,415  30,742,289  28,757,112  30,391,622  25,976,246 

Due  Banks 15,610,554  15,467,494  16,102,922  14,431,103  11,501,102 

Loans  and  Discounts..  $70,025,734  $74,527,858  $75,546,592  $77,347,718  $70,888,578 
Stocks  and  promissory 

notes 11,052,458  10,362,330     10,648,211  10,773,678  10,244,043 

Specie 10,086,542  9,455,161  10,191,974  8,968,092  6,893,236 

Cash  items 4,502,479  5,999,952  4,916,862  6,047,528  4,839,886 

Bank-notes /  2,275,172  3,148,421  2,511,326  2,308,467  2,387,008 

Due  from  Banks 10,267,207  8,817,179  8,359,328  8,767,513  7,684,308 

From  the  foregoing  table,  it  will  be  perceived  that  the 
banks  were  indebted  at  the  above  period  to  the  amount  of 
from  $101,272,468,  up  to  $110,128,104.  Their  average 
indebtedness,  including  the  refunding  of  the  capital  stock 
to  the  stockholders,  was  $106,931,004.  The  average 
amount  of  their  specie  at  the  different  periods  as  above, 
was  $9,119,001.  Deduct  the  specie  from  the  indebted- 
ness, i.  e.,  $9,119,001  from  $106,931,004,  and  we  have 
left  $97,812,003,  which  sum  must  have  been  cancelled 
by  paper. 

The  original  capital  of  the  banks  is  not  specie.  The 
bank-notes  of  one  bank  form  the  capital  of  a  second,  and 
those  of  the  first  and  second  the  capital  of  a  third.  This 
is  called  a  specie  capital.  Actually,  our  banks  have  specie 
enough  to  redeem  only  about  one-fifth  part  of  their  capital 
stock.  The  balance  of  their  capital  stock,  the  redemption 
of  the  bank-notes  in  circulation,  and  the  payment  of  the 
deposits,  are  secured  by  the  endorsed  notes  of  the  people, 
binding  the  property  of  the  drawers  and  endorsers.  Their 
property  as  much  secures  the  bank-notes,  as  it  does  their 


189 

own  notes.  The  bank  notes  are  representatives  of  the 
property  of  the  people,  and  not  representatives  of  the  prop- 
erty of  the  banks.  Not  a  single  dollar  of  the  paper  issues, 
over  and  above  the  actual  amount  of  specie,  is  secured  by 
their  capital  stock,  because,  if  none  of  these  endorsed  notes 
and  bonds  of  the  State  were  ever  paid,  not  a  single  dollar 
of  the  indebtedness  of  the  banks,  either  for  bank-notes  or 
deposits,  above  their  actual  specie,  would  ever  be  paid. 
The  $97,812,003  would  be  a  total  loss  to  the  holders  of 
the  bank-notes,  to  the  depositors,  and  to  the  stockholders. 
The  interest  collected  on  the  endorsed  notes  and  State 
bonds  supports  the  banks,  and  pays  all  their  extravagant 
expenditures  in  granite  buildings,  salaries  of  officers,  &c. 
They  can  pay  their  presidents  and  cashiers  from  $3,000 
to  $5,000  each,  and  other  expenses,  house-rent,  dec.,  in 
proportion,  to  the  amount  of  $40,000  or  $50,000  yearly. 
They  can  also  pay  to  the  stockholders  from  three,  to  five, 
six,  or  seven  per  cent  in  dividends  every  six  months.  The 
banks  under  legislative  authority  make  the  public  furnish 
the  capital,  and  then  pay  interest  on  this  capital.  But 
although  the  industry  of  the  people  supports  the  whole, 
they  have  no  voice  in  the  management.  The  directors  in 
banks  can  at  any  time  call  upon  them  to  pay  off  their  notes 
and  cancel  the  bank-notes  ;  and  if  they  fail,  they  are 
blamed  for  over-production  and  over-trading.  When 
banks  call  in  their  issues  rapidly,  and  distress  the  people, 
the  directors  in  the  banks  are  said  to  be  prudent  and  judi- 
cious managers.  If  the  people  should  demand  specie,  the 
banks  could  not  pay  it,  unless  they  could  collect  it  out 
of  the  endorsed  notes  of  thepeople.  This  could  not  be 
done.  These  endorsed  notes  were  never  founded  upon 


190 

specie,  because  the  drawing  and  endorsing  of  the  notes  by 
the  people,  and  the  engraving  of  the  bank-notes  by  the 
banks,  and  the  exchange  of  the  bank-notes  for  the  en- 
dorsed notes,  do  not  create  gold  and  silver  coins  to  pay 
either  the  bank-notes  or  the  endorsed  notes.  There  has 
never  been  a  time  when  the  banks  could  have  paid  specie 
for  a  week,  for  their  average  deposits  are  more  than  three 
times  their  whole  amount  of  specie. 

The  table  shows  that  the  average  amount  of  the  capital 
of  the  banks  in  the  State  of  New  York,  during  the  period 
mentioned,  was  $43,569,591,  and  their  average  indebted- 
ness was  Si 06,93 1,004.  The  difference  of  these  two  sums 
is  863,361,413.  The  annual  interest  upon  $63,361,413, 
at  seven .  per  cent,  was  $4,435,333,  which  the  people  of 
the  State  paid  to  the  stockholders  and  officers  of  the 
banks  for  furnishing  bank-notes  with  which  to  transact 
business.  The  people  wrote  their  own  notes,  had  them 
endorsed,  and  took  them  to  the  banks  to  be  discounted. 
The  banks  engraved  their  bank-notes,  and  gave  them  in 
exchange  for  the  endorsed  notes.  For  engraving  these 
notes,  and  making  these  exchanges,  the  people  of  the 
State  paid  to  the  banks  annually  $4,435,333,  or  as  much 
as  the  farmers  of  the  State  received  for  four  millions  four 
hundred  and  thirty-five  thousand  three  hundred  and  thirty- 
three  bushels  of  wheat,  at  $1  per  bushel.  The  labor  of 
producing  such  an  amount  of  wheat  was  great ;  the  labor 
of  producing  the  bank-notes  was  very  small,  yet  the  inter- 
est paid  on  these  bank-notes  would  have  bought  this  quan- 
tity of  wheat.  At  the  end  of  the  year  the  people  of  the 
State  returned  all  the  bank-notes  to  the  banks,  together 
with  the  value  of  this  large  amount  of  wheat  to  pay  the 


191 


year's  interest.  The  same  amount  of  interest  accrued 
every  year,  and  called  for  the  same  amount  of  their  pro- 
ducts. They  sold  their  products  in  market,  and  paid  the 
interest  to  the  banks  with  the  proceeds  of  the  sales,  the 
same  to  them  as  if  they  had  carried  their  wheat  and 
products  directly  to  the  banks  to  pay  the  interest.  If  the 
entire  capital  of  the  banks  had  been  specie,  the  people 
would  have  paid  the  same  amount  for  the  use  of  the  bank- 
notes which  would  have  been  issued  over  and  above  the 
specie. 

The  interest  yearly  paid  for  the  use  of  $63,361,413,  in 
bank-notes,  was  a  legal  equivalent  for  the  four  millions 
four  hundred  and  thirty-five  thousand  three  hundred 
and  thirty-three  bushels  of  wheat  yearly  raised  upon 
a  certain  quantity  of  land ;  and  the  legal  value  of  the 
$63,361,413,  in  bank-notes,  was  equal  to  the  actual  value 
of  the  land,  and  the  labor  necessary  to  produce  the  wheat. 
The  power  of  the  bank-notes  was  an  exact  balance 
against  products  and  the  land  upon  which  they  were  pro- 
duced. If  the  quantity  of  money  was  at  any  time  dimin- 
ished, and  the  rate  of  interest  increased,  a  larger  amount 
of  products  was  required  to  balance  the  smaller  amount 
of  money,  and  a  larger  amount  of  products  to  balance  the 
interest  on  the  smaller  amount  of  money.  Still  this  money 
must  have  been  used  to  balance  products,  for  it  was  the 
only  public  representative  of  value,  and  must  have  been 
employed  as  a  tender,  or  as  a  substitute  for  a  tender,  in 
payment  of  debts.  The  promise  of  the  banks  to  pay  spe- 
cie for  their  bank-notes  on  demand,  does  not  enable  them 
to  pay  the  specie,  nor  does  it  alter  the  monopolizing  power 
of  the  interest  on  the  money  over  products. 


192 

If  our  bank-notes  are  good  for  the  purchase  of  property 
by  the  people,  certainly  they  should  be  equally  good  for 
the  purchase  of  property  by  the  banks.  Let  us  reverse 
the  relative  positions  of  the  banks  and  the  people.  Sup- 
pose, instead  of  lending  their  money  to  the  people  to  buy 
property,  the  banks  should  buy  it  with  their  bank-notes, 
and  let  it  out  to  the  people.  This  would  put  the  bank- 
notes into  circulation,  and  the  banks  would  be  the  land- 
lords of  the  property,  instead  of  being  the  owners  and 
lenders  of  the  money.  Let  the  people  then  call  upon  the 
•  banks  for  the  redemption  of  the  bank-notes  in  specie,  and 
in  default  of  payment  sue  them ;  and  if  they  wish  to  bor- 
row bank-notes  to  save  their  property  from  sheriff's  sale, 
charge  them  one,  two,  or  three  per  cent  a  month  for  the 
use  of  the  bank-notes.  Let  the  banks  try  to  rent  their 
property  so  as  to  make  the  rents  pay  these  rates  of  inter- 
est. This  would  only  place  the  stockholders  in  a  posi- 
tion similar  to  that  in  which  they  now  often,  though  indi- 
rectly, place  the  people.  It  is  evident  that  it  would  be  im- 
possible for  them  to  redeem  their  bank-notes  in  specie,  or 
to  redeem  them  in  any  way  except  by  selling  their  prop- 
erty and  taking  these  bank-notes  in  payment,  as  the  people 
now  give  their  notes  to  the  banks  and  pay  the  discount, 
and  when  their  notes  become  due,  collect  these  bank-notes 
together,  and  take  them  to  the  bank  to  redeem  their  en- 
dorsed notes.  If  the  banks  should  buy  the  property  with 
their  bank-notes,  and  their  friends  should  guarantee  the 
property  worth  the  price  paid,  the  property  and  the 
guarantee  would  secure  the  bank-notes.  It  would 
only  place  the  banks  under  the  necessity  of  cultiva- 
ting their  property,  and  selling  the  products  to  pay 


193 


the  interest.  It  would  be  as  possible  to  redeem  the 
bank-notes  in  specie,  under  the  supposed  circumstances, 
as  it  now  is.  If  the  banks  were  called  upon  to  redeem 
them  now,  they  would  crowd  the  people,  and  sell  their 
property,  and  in  the  supposed  circumstances,  the  people 
would  crowd  the  banks,  and  sell  their  property.  In  both 
cases  the  debts  must  be  cancelled  by  offsetting  the  property 
against  them,  for  they  could  not  be  redeemed  in  specie. 

It  is  perfectly  obvious  that  our  legislative  bodies  have 
founded  our  banking  system  on  false  pretences — upon 
promises  the  banks  neither  can,  nor  expect  to  fulfil.  The 
only  reason  why  the  banks  can  exist  upon  such  a  basis  is, 
that  the  people  do  not  demand  the  specie  for  their  notes 
and  deposits.  The  government  enacts  a  law  binding  all 
debtors  to  make  their  payments  in  specie,  when  it  is  per- 
fectly well  known  that  specie  does  not  exist  in  sufficient 
quantities  to  enable  them  to  fulfil  the  requirement.  More 
than  eleven-twelfths  of  the  debts  between  the  banks  and 
the  people  are  contracted  by  a  paper  balance,  and  have 
no  reference  to  specie,  Of  course,  the  only  means  of  pay- 
ing them  is  by  balancing  one  paper  note  with  another. 

If  the  banks,  or  the  people,  or  the  government  should  in 
every  case  exact  what  the  laws  require,  it  would  be  im- 
possible to  meet  the  demand.  If  the  three  should  exact 
specie  in  payment  for  their  obligations,  it  would  inevita- 
bly bankrupt  them  all,  and  almost  certainly  cause  starva- 
tion in  the  midst  of  abundance,  if  not  civil  war.  If  the 
governments  of  the  States  as  well  as  the  General  Govern- 
ment should  refuse  to  take  bank-notes  in  collecting  and  dis- 
bursing their  revenues,  probably  the  people  could  not  pay 
their  duties  and  taxes.  The  necessary  withdrawal  of 

25 


194 


specie  to  meet  these  engagements  would  at  once  cause  the 
banks  throughout  the  Union  to  suspend  specie  payments. 
The  need  of  money  would  then  compel  the  people  to  pe- 
tition the  legislatures  of  their  respective  States  to  sanction 
this  suspension,  and  allow  the  banks  to  continue  to  dis- 
count without  paying  specie  on  demand.  They  would, 
however,  still  be  allowed  to  charge  interest  upon  all  the 
endorsed  notes  of  the  people  received  in  exchange  for  the 
bank-notes  which  would  then  be  avowedly  destitute  of  any 
basis  of  specie. 

Can  anything  be  more  directly  opposed  to  every  prin- 
ciple of  justice,  than  laws  requiring  the  performance  of 
impossibilities  ?  Laws  which,  if  the  people  should  at- 
tempt to  execute,  instead  of  promoting  peace  and  happi- 
ness, would  cause  the  greatest  calamities  that  could  pos- 
sibly befall  a  nation.  It  is  essential  to  good  government 
that  the  interest  and  welfare  of  the  people  should  require 
the  execution  of  its  laws,  and  whenever  their  violation 
becomes  necessary  to  the  public  good,  it  is  self-evident 
that  there  is  something  radically  wrong  in  the  govern- 
ment itself.  A  government  should  never  allow  anything 
to  pass  as  a  substitute  for  money  ;  the  tender  itself  should 
be  equal  in  amount  to  the  wants  of  business.  The  law 
making  gold  and  silver  the  only  tender  in  payment  of 
debts,  is  well  adapted  to  build  up  and  sustain  monarch- 
ical governments,  because  it  must  infallibly  accumulate 
property  in  the  hands  of  a  few,  constituting  aristocracies, 
which  are  essential  to  this  form  of  government ;  but  the 
same  reason  that  qualifies  it  so  admirably  for  this  pur- 
pose, renders  it  incompatible  with  a  government  having 
for  its  sole  object  the  welfare  and  happiness  of  the  people. 


195 


SECTION  III. 

BASIS  OF  THE  BANK  OF  ENGLAND. 

The  Bank  of  England  is  established  upon  a  basis  similar 
to  that  of  the  banks  in  the  United  States.  Endorsed 
notes  secure  the  bank-notes,  and  not  the  specie  held  by 
the  bank.  The  bank-notes  are  not  representatives  of 
specie.  Her  bullion  seldom  much  exceeds  the  amount  of 
her  deposits.  Should  depositors  draw  the  specie,  the 
only  way  in  which  the  bank  could  redeem  her  bank- 
notes, would  be  to  take  them  in  payment  for  the  endorsed 
notes  she  holds  against  individuals.  If  these  endorsed 
notes  were  not  good,  the  bank-notes  would  be  worthless. 
These  endorsed  notes  are  secured  by  the  property  of  their 
drawers  and  endorsers  ;  their  property,  and  not  the  prop- 
erty of  the  bank,  secures  the  bank-notes. 

The  Bank  of  England  first  issues  £14,000,000,  on  gov- 
ernment securities.  This  is  making  paper  balance  paper. 
It  gives  to  the  bank  no  ability  to  pay  the  £14,000,000 
in  bullion.  If  two  individuals  should  exchange  obligations 
for  £14,000,000,  this  exchange  would  not  produce 
bullion  to  pay  either  obligation.  The  bank-notes  for 
£14,000,000  have  not  a  fraction  of  value,  except  in  so  far 
as  they  are  secured  by  the  government  bonds,  and  these 
bonds  are  secured  not  by  the  bank,  but  by  the  property 
and  productive  industry  of  the  people  of  England. 

All  the  gains  of  the  bank  by  the  recent  rise  of  interest, 


196 


were  unfairly  taken  from  the  industry  of  the  people,  and 
appropriated  to  the  stockholders  of  the  bank.  The  idea 
was  given  out  that  the  bank  was  compelled  to  raise  the 
rate  of  interest  in  order  to  be  able  to  pay  specie  for 
her  obligations.  If  the  bank  had  been  established  upon 
a  proper  basis,  and  had  loaned  her  money  to  aid  the 
productive  industry  of  the  nation,  at  a  low  and  uniform 
rate  of  interest,  instead  of  making  her  loans  to  stock- 
jobbers and  brokers  to  re-loan  at  high  rates,  the  recent 
crisis,  or  any  former  crisis  in  her  monetary  affairs  could 
not  have  happened.  But  the  bank  is  established  upon  a 
false  basis,  promising  to  pay  specie  which  she  has  not  and 
cannot  have.  Therefore,  in  the  recent  crisis,  she  was  com- 
pelled to  loan  her  money  to  brokers  and  stock-jobbers, 
otherwise  they  would  probably  have  drawn  her  specie,  and 
compelled  her  to  suspend  specie  payments.  The  bank  and 
this  class  of  citizens  work  for  one  another's  interest,  and 
extort  the  last  penny  from  the  producers  of  the  wealth, 
under  the  pretence  that  the  money,  or  the  bullion,  is  the 
real  wealth  of  the  nation,  and  they  keep  the  people  con- 
stantly toiling  for  the  bullion  without  ever  possessing 
it,  while  the  bullionists  contrive  to  live  in  luxury  upon 
what  the  labor  of  the  people  produces. 

To  show  that  the  bank  is  sustained  in  her  specie  pay- 
ments by  her  reciprocal  operations  with  capitalists,  and 
that  the  bank-notes  are  secured  by  the  endorsed  notes 
of  the  people,  and  not  by  the  bullion  in  her  vaults,  it  will 
only  be  necessary  to  refer  to  the  weekly  reports  of  the 
bank.  October  23, 1847,  bullion,  £8,312,691.  Deposits, 
£8,588,509.  Net  circulation,  £20,318,175.  The  bullion 
amounted  to  £275,818  less  than  the  deposits;  and  if  the 


197 


deposits  had  been  called  for  in  specie,  there  would  not 
have  been  a  shilling  in  bullion  toward  paying  the 
£20,318,175  of  bank-notes.  These,  if  paid  at  all,  must 
have  been  paid  by  balancing  them  off  against  the 
endorsed  notes  of  the  people,  held  by  the  bank. 
Again,  January  22,  1848,  the  bullion  had  increased  to 
£13,176,812,  the  deposits  had  increased  to  £10,774,870, 
and  the  circulation  had  diminished  to  £19,111,880.  De- 
duct the  deposits  from  the  bullion,  and  there  remained 
£2,401,942  in  bullion  to  pay  £19,111,880.  Deducting 
the  bullion  there  remained  £16,709,938,  which,  if  it  had 
been  paid  at  all,  must  have  been  paid  by  balancing  off  the 
bank-notes  against  the  endorsed  notes  held  by  the  bank ; 
as  if  two  individuals  should  exchange  notes,  and  agree  to 
pay  them  in  specie,  but  as  neither  has  the  specie  to  pay, 
agree  to  exchange  notes  again,  and  thus  close  the 
transaction.  The  exchange  of  the  bank-notes  for  the  en- 
dorsed notes  of  the  people,  is  different  in  this  respect : 
the  bank  pays  no  interest  to  the  people,  but  it  makes  the 
people  pay  interest  on  the  bank-notes,  and  this  interest 
absorbs  the  productions  of  labor. 


SECTION  IV. 
OF  THE  BALANCING   POWER  OF   BANK-NOTES  AND  DEPOSITS. 

It  has  been  already  stated  that  if  banks  become 
liable  for  a  larger  sum  than  the  amount  of  specie  in 
their  vaults,  the  surplus  above  the  specie  must  be  paid 


198 

by  balancing  paper  notes  for  paper  notes,  until  the  amount 
of  specie  in  their  vaults  is  exactly  equal  to  the  amount  of 
paper  for  which  they  are  liable.  They  can  pay  specie  for 
the  remainder  of  their  paper.  This  statement  was  made 
taking  into  consideration  only  the  endorsed  notes  discount- 
ed by  the  banks,  and  the  bank-notes  issued  by  them  as  their 
proceeds.  The  bank-notes  are,  however,  not  only  the 
balancing  power  for  the  endorsed  notes  discounted,  but 
are  also  the  balancing  power  for  all  individual  notes  given 
in  payment  for  sales  of  merchandise.  Although  these  bu- 
siness notes  should  not  be  discounted  at  bank,  nor  put  into 
bank  for  collection,  the  bank-notes  are  the  balancing 
power  with  which  all  these  debts  must  be  paid,  as  well  as 
all  State  bonds  issued,  all  bonds  and  mortgages  given  by 
individuals,  and  all  debts  contracted  for  lands,  goods, 
wares  and  merchandise  sold  on  credit  or  for  cash.  All 
these  debts  must  be  paid  either  with  bank-notes,  or  with 
specie.  Taking  an  average  of  the  whole  amount  of  con- 
tracts, it  is  probable  that  not  one  dollar  in  a  hundred  is 
paid  in  specie. 

A  small  amount  of  money  is  always  capable  of  balan- 
cing or  paying  a  large  amount  of  notes,  bonds  and 
mortgages,  and  also  of  purchasing  every  description  of 
property.  The  money  wrhich  pays  for  one  farm,  may 
also  pay  for  a  second,  third,  and  fourth,  the  same  day. 

Banks  gain  as  much  by  the  deposits  left  with  them,  as 
they  would  by  the  circulation  of  an  equal  amount  of  bank- 
notes. They  pay  no  interest  on  deposits,  and  they  lend 
their  deposits  to  depositors  and  others,  and  charge  inter- 
est on  them.  In  cities,  every  man  who  has  a  large  busi- 
ness, keeps  an  account,  and  deposits  his  ready  money  in 


199 


some  bank.  Suppose  a  thousand  merchants  and  me- 
chanics keep  deposit  accounts  of  a  thousand  dollars  each 
in  the  same  bank,  the  sums  will  amount  to  a  million  of 
dollars.  The  bank  can  lend  this  sum  to  the  depositors 
themselves,  and  make  them  pay  interest  on  it.  The  money 
may  be  paid  out  many  times  during  the  day  ;  but  before 
three  o'clock,  when  the  banks  close,  it  will  return  in 
deposit,  and  be  ready  for  use  the  next  day.  Some  of 
the  deposit  accounts  may  be  drawn  down  to  a  hundred, 
and  some  even  to  five  dollars,  while  others  may  be  in- 
creased to  five,  ten,  or  twenty  thousand  dollars,  yet  the 
average  balance  in  bank  will  vary  but  little.  It  appears 
from  the  Report  of  the  Bank  Commissioners,  that  the  de- 
posit accounts  in  cities  are  always  very  large,  and  gener- 
ally small  in  country  banks.  When  farmers  have  money, 
they  usually  keep  it  until  they  have  occasion  to  pay  it  out. 
The  inhabitants  of  large  cities  deposit  their  ready  money 
in  banks,  and  pay  it  out  by  giving  checks  on  the  banks. 

Most  of  the  contracts  in  large  cities  are  paid  by  checks 
on  banks.  These  checks  are  the  same  as  bank-notes,  for 
the  receiver  of  a  check  goes  at  once  to  the  bank,  and 
draws  it,  or  else  deposits  it  the  same  as  if  it  were  a  bank- 
note. If  the  giver  of  a  check  had  not  the  money  to  his 
credit  on  the  books  of  the  bank,  the  bank  would  not  pay 
his  check.  The  money  is  kept  on  deposit  for  convenience 
and  safety  He  can  draw  a  check  for  a  larger  or  a  smaller 
amount,  and  thus  avoid  counting  money.  The  holder  of 
a  check  has  as  good  right  to  draw  specie  as  the  holder 
of  bank-notes. 


200 


SECTION  V. 

OF  THE  MANAGEMENT  OF  BANKS,  AND  THE  EFFECTS  OF 
THEIR  OPERATIONS  UPON  THE  PROSPERITY  OF  TRADE 
AND  PRODUCTIVE  INDUSTRY. 

Our  present  Banking  System,  and  the  present  legal 
rates  of  interest,  even  with  the  fairest  and  best  manage- 
ment, are  a  powerful  means  for  the  unjust  accumulation  of 
wealth.  But  looking  a  little  deeper  into  the  subject,  and 
observing  how  their  business  is  conducted,  we  shall  find 
that  their  unavoidable  evil  tendencies  are  greatly  aug- 
mented by  the  manner  in  which  they  are  controlled  and 
directed. 

The  banks  are  empowered  to  lend  two  and  a  haTf  times 
their  capital.  They  have  no  legal  right  to  exceed  this 
sum,  but  they  may  expand  and  contract  their  loans  as 
much  as  they  please  within  these  limits.  They  can  dis- 
count notes  at  longer  or  at  shorter  dates.  They  some- 
times discount  notes  having  six,  eight,  ten  and  twelve 
months  to  run,  and  then  suddenly  stop  discounting  any 
having  over  ninety  days  to  run.  They  can  make  money 
very  abundant,  or  very  scarce.  The  banks  can  make 
good  endorsed  notes  sell  in  Wall  street  at  a  discount  of 
one,  two,  or  three  per  cent  a  month ;  or  they  can  make 
money  so  plenty,  that  the  same  quality  of  paper  will  sell 
at  less  than  a  half  per  cent  a  month.  They  can  make  the 
business  of  a  nation  prosperous,  and  make  labor  com- 
mand good  prices,  or  they  can  so  greatly  curtail  business 


201 


that  the  industrious  laborer  will  be  compelled  to  beg  his 
living. 

When  banks  are  extending  their  discounts,  they  will 
hold  out  inducements  to  merchants  and  mechanics  to  open 
accounts  with  them,  being  glad  to  discount  for  them  to 
any  reasonable  amount.  The  merchant  and  the  mechanic 
open  accounts,  and  perhaps  for  a  considerable  time  the 
paper  which  they  offer  is  discounted  at  the  legal  interest 
of  seven  per  cent.  They  are  well  satisfied,  although  the 
bank  discounts  for  brokers  and  large  capitalists  at  four, 
five,  and  six  per  cent  per  annum,  while  it  charges  them 
seven  per  cent.  But  suddenly  there  is  an  apparent  scar- 
city of  money,  and  the  bank  declines  discounting  the  paper 
of  merchants  and  mechanics  at  long  dates.  The  appli- 
cants inquire  of  the  officers  the  reason  of  this  refusal. 
They  are  answered,  that  money  is  becoming  scarce,  and 
that  the  bank  discounts  but  one-half  the  paper  oifered.  In 
reality  the  amount  of  money  is  not  in  the  least  diminished, 
nor  the  amount  of  discounts  required  increased,  but  banks 
and  capitalists  keep  it  in  their  own  possession  to  make  the 
money-market  tighter,  that  they  may  re-loan  to  the  busi- 
ness community  at  higher  rates.  If  for  two  days  they  dis- 
count only  one-half  their  usual  amount  of  paper,  it  is  felt 
in  the  money-market.  Those  who  are  disappointed  in  ob- 
taining discounts,  must  procure  money  elsewhere.  They 
are  driven  to  brokers  and  large  capitalists,  and  are  obliged 
to  pay  twelve  per  cent  per  annum  for  money  which  has 
been  borrowed  by  favored  brokers  and  capitalists  at  seven 
per  cent  per  annum. 

The  merchant  and  the  mechanic  again  offer  at  bank  for 
discounts,  and  are  a  second  time  disappointed.  Upon  in- 

26 


202 


quiry  they  are  again  informed  that  money  is  becoming 
very  scarce,  and  that,  besides,  in  looking  over  their  de- 
posit accounts,  the  officers  .find  theirs  small,  and  that 
others  who  keep  much  larger  accounts  are  now  asking  for 
discounts.  The  merchant  and  the  mechanic  reply  that 
they  have  heretofore  kept  good  balances,  and  should  be 
glad  to  continue  them,  if  the  bank  would  discount  for 
them.  But  they  are  told  that  their  balances  were  never 
so  large  as  those  kept  by  certain  capitalists  and  brokers, 
who,  although  they  kept  large  balances,  seldom  asked  for 
discounts.  Now,  as  money  is  scarce  in  the  market,  and 
they  need  discounts,  the  bank  must  favor  them,  for  it  is 
bound  to  attend  to  its  own  interest,  and  merchants  and 
mechanics  must  attend  to  theirs.  In  these  hard  times  the 
bank  must  discount  for  those  who  keep  the  largest  de- 
posits, and  offer  the  best  secured  paper,  the  same  as  mer- 
chants and  mechanics  will  sell  their  wares,  or  goods,  to 
those  customers  who  serve  their  interests  best.  It  is  as 
much  the  duty  of  the  banks  to  consult  their  interest,  and 
the  interest  of  the  stockholders,  as  it  is  for  merchants  and 
mechanics  to  consult  their  interests,  and  the  interests  of 
their  families.  This  reasoning  sounds  plausible  enough, 
and  seems  to  satisfy  the  people.  If  the  articles  dealt  in 
by  both  parties  were  the  actual  productions  of  labor,  and 
neither  of  them  was  created  by  law,  these  arguments 
would  have  some  force.  Or  if  any  man  who  had  a  pack- 
age of  calicoes  could  issue  paper-money  bearing  no  inter- 
est, and  pay  his  debts  with  it — and  the  mechanic  could 
make  a  paper  representative  of  his  steam  engine  pass  as 
money  as  easily  as  a  bank  can  engrave  and  sign  bank- 


203 


notes,  and  make  them  pass  as  money,  this  reasoning 
might  be  sound. 

But  when  the  article  traded  in  by  banks  is  a  legal  tender 
for  debts,  or  is  by  necessity  used  as  such,  and  the  articles 
dealt  in  by  others  are  the  products  of  labor,  and  not  a 
tender,  nor  used  as  a  tender  in  payment  of  debts,  then 
such  arguments  are  false  and  should  be  powerless.  They 
do  not  bear  upon  the  facts ;  for  the  holders  of  the  pro- 
ducts of  labor,  or  of  their  avails,  are  dependent  upon  the 
banks  who  make  and  possess  the  money  which  is  a  pro- 
duct of  law.  It  requires  little  labor  to  create  millions  of 
dollars.  The  labor  to  make  a  five  thousand  dollar  bank- 
note is  the  same  as  to  make  a  one  dollar  note.  But  the 
difference  of  labor  between  raising  five  thousand  bushels 
of  wheat,  and  one  bushel,  is  very  great.  Yet  the  bank- 
note for  five  thousand  dollars  is  as  much  legally  worth 
five  thousand  times  more  than  the  one  dollar  bill,  either  to 
lend  upon  interest,  or  to  purchase  products,  as  the  five 
thousand  bushels  of  wheat  are  worth  five  thousand  times 
more  than  one  bushel. 

But  to  return.  The  applications  of  the  merchant  and 
the  mechanic,  at  bank,  for  discounts,  are  refused.  The 
paper  they  had  discounted  when  money  was  plenty  is  ma- 
turing, and  must  be  paid.  Meanwhile,  in  Wall-street 
interest  rises  from  one  to  two  per  cent  a  month.  Cap- 
italists and  brokers  find  it  very  profitable  to  get  the 
notes  which  they  buy  at  two  per  cent  a  month  dis- 
counted at  seven  per  cent  per  annum.  The  bank  con- 
siders this  paper  far  preferable  to  that  of  the  mechanic 
and  of  the  merchant,  because  the  capitalist  or  the  broker, 
who  bought  the  paper,  was  careful  to  have  it  secured  by 


204 


good  endorsers  before  the  purchase,  and  offers,  beside,  to 
leave  a  certain  portion  of  the  proceeds  on  deposit,  which 
the  bank  can  loan  to  others.  The  refused  applicants  at 
bank  have  no  alternative  but  to  pay  the  two  per  cent  a 
month  to  the  broker  or  to  the  capitalist.  Capitalists  gen- 
erally buy  notes  through  a  broker,  and  the  broker  re- 
ceives a  quarter  per  cent  on  the  amount,  for  brokerage. 
This,  too,  must  be  paid  by  the  borrowers,  in  addition  to 
the  two  per  cent  a  month. 

As  money  becomes  more  and  more  scarce,  and  the  of- 
ferings increase,  the  paper  of  large  capitalists,  and  of  the 
richest  merchants  and  brokers  is  often  thrown  out,  and 
not  discounted.  If  the  more  humble  applicant,  the  mer- 
chant or  the  mechanic,  should  again  inquire  why  his  paper 
could  not  be  discounted,  the  officers  of  the  bank  would 
mention  the  names  of  some  of  the  most  wealthy  men, 
whose  paper  they  were  obliged  to  throw  out  for  want  of 
means  to  discount  it.  In  Wall-street  money  is  loaned  for 
from  two  to  four  per  cent  a  month,  and  even  at  these 
rates,  the  best  of  paper  can  be  obtained,  with  bonds  and 
mortgages,  or  bank  and  State  stocks  as  security  for  the 
prompt  payment  of  notes. 

Directors  in  banks  who  are  allowed  by  law  to  borrow 
an  amount  equal  to  one-third  of  the  capital  of  the  bank, 
have  an  opportunity  to  borrow  money  at  the  usual  rates, 
and  purchase  State  bonds,  and  other  securities,  at  a  great 
discount  from  their  par  value.  Capitalists  who  loaned  out 
money  when  it  was  abundant,  at  six  or  seven  per  cent 
per  annum,  call  it  in,  and  invest  it  in  State  stocks,  or  in 
bonds  and  mortgages,  which  can  be  purchased  at  ten,  fif- 
teen, or  twenty  per  cent  discount.  If  money  were  plenty, 


205 

and  the  rate  of  interest  uniform,  the  State  bonds  and  all 
other  securities  would  be  of  uniform  value,  consequently 
there  would  be  no  inducement  to  make  a  sacrifice  of  one 
class  to  re-invest  in  another,  because  no  advantage  could 
be  gained. 

The  apparent  scarcity  of  money  soon  spreads  in  every 
direction  throughout  the  country.  The  banks  in  all  the 
cities  and  towns  shorten  their  discounts,  and  prepare  for 
the  approaching  crisis.  Their  officers  look  over  their  pa- 
per, and  collect  that  of  the  men  whom  they  think  least 

0 

able  to  pay  their  notes.  Not  that  they  would  suspect  the 
ability  of  these  men  to  meet  their  engagements  if  money 
were  plenty,  and  at  the  ordinary  rates  of  interest ;  but 
they  doubt  whether  they  could  maintain  their  payments 
during  a  long  pressure.  The  officers  therefore,  if  possible , 
collect  all  paper  of  this  description,  and  from  time  to  time 
obtain  more  security  upon  such  as  cannot  be  realized  in 
money.  They  now  lend  money  upon  such  paper  only  as 
they  consider  very  strong  and  well  secured,  and  which 
they  think  will  be  paid  in  full  at  maturity. 

Mechanics  and  merchants  who  have  sold  their  wares  or 
goods  to  the  country,  are  compelled  to  pay  not  only  one, 
two,  three  or  four  per  cent  a  month  upon  the  money  they 
have  to  borrow,  but  the  scarcity  prevents  the  collection 
of  the  debts  due  by  their  country  customers  ;  and  af  they 
have  had  any  of  their  notes  discounted  before  the  pres- 
sure, they  come  back  upon  them  to  pay  in  addition  to 
their  other  payments.  The  payment  of  these  exorbitant- 
rates  of  interest  for  the  use  of  money,  is  sufficient  to  ac- 
count for  all  our  commercial  revulsions. 

When  a  scarcity  of  money  commences  in  Wall  street, 
the  offerings  of  paper  to  be  discounted  at  the  banks  are 


206 

greatly  increased,  sometimes  fifty  per  cent,  sometimes  a 
hundred  per  cent.  The  reason  is  this :  when  banks  stop 
discounting  long  paper,  and  confine  their  loans  to  paper 
having  thirty,  sixty,  or  ninety  days  to  run,  in  order  to 
maintain  their  circulations,  the  discounts  must  be  increased 
just  in  proportion  to  the  shortening  of  the  paper.  If  the 
banks  discount  paper  having  only  sixty  days  to  run,  then 
in  the  sixty  days  they  will  collect  in  the  whole  amount 
under  discount.  If  their  loans  have  on  an  average  only 
ten  days,  then  in  ten  days  they  will  collect  all  their  loans, 
and  will  not  have  a  dollar  under  discount  unless  they  loan 
out  as  well  as  collect  in  daily.  If  they  should  discount 
no  paper  having  more  than  one  day  to  run,  they  would 
collect  in  all  their  loans  every  day,  and  must  re-loan  the 
same  amount  daily  to  maintain  their  circulations.  There- 
fore it  is  evident  that  if  the  banks  maintain  their  line  of 
discounts  they  must  be  increased  exactly  in  proportion  to 
the  shortness  of  the  paper  that  is  discounted.  Suppose 
a  merchant  has  $1,000  to  pay,  and  holds  a  business  note 
for  $1,000,  payable  in  six  months.  To  obtain  a  discount, 
he  is  compelled  to  procure  another  note,  having  not 
more  than  sixty  days  to  run.  At  the  end  of  sixty  days 
he  must  procure  a  second  discount  for  a  thousand  dollars 
to  pay  the  first,  and  in  sixty  days  more  a  third  to  pay  the 
second.  In  six  months  he  is  obliged  to  procure  three 
loans  for  a  thousand  dollars  each,  and  pay  three  thousand 
dollars,  whereas,  if  the  bank  had  discounted  the  six 
months'  note,  he  would  have  procured  but  one  discount 
for  a  thousand  dollars.  Consequently,  during  the  six 
months  he  would  have  offered  but  one-third  as  much  at 


207 


bank,  and  but  one-third  as  much  would  have  been  required 
to  make  his  payments. 

Interest  on  money  will  sometimes  rise  in  a  few  months 
from  six  or  seven  per  cent  per  annum,  to  two  or  three  per 
cent  a  month.  In  1837,  a  broker  in  Wall-street  sold  the 
post-notes  of  the  Delaware  and  Hudson  Canal  Bank,  hav- 
ing four  months  to  run,  at  a  discount  of  five  per  cent  a 
month  ;  and  sold  more  notes  the  next  day,  for  the  same 
person,  at  six  and  a  quarter  per  cent  a  month.  Six  and  a 
quarter  per  cent  a  month,  for  four  months,  would  take  one- 
fourth  from  the  principal  of  the  note.  This  is  equivalent 
to  compelling  a  tenant  to  pay  in  advance  one-fourth  of  the- 
value  of  a  house,  or  farm,  for  the  use  or  rent  of  three- 
fourths  during  a  period  of  four  months,  at  the  end  of 
which  he  is  responsible  for  the  return  of  the  whole  ;  for 
the  return  of  the  fourth  of  which  he  had  not  the  use,  as 
well  as  of  the  three-fourths  which  were  in  his  possession. 
The  borrower  of  the  money  received  but  three-fourths  of 
the  par  value  of  the  notes.  If  at  the  end  of  the  four 
months,  when  the  post-notes  became  due,  the  bank  had 
not  paid  them,  the  borrower  would  have  been  bound  to 
pay  their  par  value.  As  well  might  the  tenant  pay  as  ex- 
orbitant a  rent  for  a  house  or  a  farm,  as  the  borrower  of 
money  so  high  a  rate  of  interest.  These  high  rates  of  in- 
terest are  not  paid  by  all.  Doubtless,  favorites  at 
bank,  could,  and  did  borrow  money  the  same  day  in  Wall- 
street  at  seven  per  cent  per  annum.  The  Delaware  and 
Hudson  Bank  was  solvent  and  good  at  the  period  named, 
and  has  so  continued.  At  their  maturity,  if  not  before, 
the  post-notes  were  paid.  The  money  loaned  at  six  and 


208 

a  quarter  per  cent  a  month  was  no  better  than  that  loaned 
at  seven  per  cent  per  annum. 

Take  from  a  $1,000  post-note  $250,  and  there  remains 
$750,  of  which  the  borrower  had  the  use  for  four  months, 
by  paying  the  lender  $250.     The  favored  one  who  bor- 
rowed at  bank  $750  at  seven  per  cent  interest  per  an- 
num, paid  for  its  use  for  four  months  $18  40.     The  first 
borrower  paid  thirteen  times  more  than  the  second  for  the 
use  of  the  same  article,  in  the  same  street,  and  on  the 
same  day.     Neither  bought  anything  but  the  use  of  the 
principal,  for  at  the  end  of  the  period  the  principal  was 
returned  to  its  owner.     A  man  who  was  obliged  to  borrow 
money  was  charged  thirteen  times  more  than  one  who  had 
no  use  for  it  except  to  gain  the  difference  in  interest. 
This  procedure  was  as  unjust  as  it  would  have  been  to 
charge  men  suffering  for  food  $6  50  a  bushel  for  pota- 
toes, and  to  charge  those  who  possessed  an  abundance 
only  fifty  ceivts.     Such  exactions  do  not  occur  in,  sales 
of  products,  but  it  is  no  uncommon  thing  in  Wall-street 
for  money  to  be  loaned  to  the  needy  at  a  quarter  per  cent 
a  day,  or  ninety  per  cent  a  year,  which  is  fourteen  times 
more  than  banks  are  allowed  to  charge  for  discounting 
short  paper.     If  a  government  agent  should  be  directed 
to  sell  a  quantity  of  flour  to  a  needy  people  at  six  dollars 
per  barrel,  but  for  certain  considerations,  should  sell  it  all 
to  a  capitalist,  knowing  that  he  would  compel  the  people 
to  pay  $90  a  barrel  or  starve,  it  would  be  similar  to  the 
abuse  of  the  power  conferred  on  banks,  and  wielded  by 
them  in  favor  of  capital. 

Some  of  the  large  capitalists  in  the  city  of  New  York, 
during  the  years  included  between  1836  and  1840,  bought 


209 


up  bonds  and  mortgages  perfectly  well  secured,  and  bear- 
ing six  and  seven  per  cent  interest,  at  from  ten  to  thirty- 
three  and  a  third  per  cent  discount  from  their  par  value. 
They  also  bought  millions  of  dollars'  worth  of  well  en- 
dorsed notes  at  from  one  and  a  half  to  five  per  cent  a 
month  from  the  face  of  the  notes.  Some  will  say 
that  the  paper  sold  at  these  rates  was  of  doubtful 
character,  but  such  was  not  generally  the  fact.  Indi- 
viduals of  known  wealth,  extensively  engaged  in  business, 
and  in  want  of  money,  sold  large  amounts  of  paper  en- 
dorsed by  names  of  the  same  character,  at  three  per  cent 
a  month.  These  notes  were,  to  say  the  least,  quite  as 
safe  as  the  bank-notes  for  which  they  were  exchanged. 

The  following  illustration  will  show  the  bearings  of 
these  speculations  in  money  upon  the  welfare  of  the  pro- 
ducing  classes.     H.  is  a  wealthy  broker,  and  a  bank  di- 
rector.    His  income,  as  also  the  income  of  the  bank,  de- 
pends upon  the  interest  on  money.     He  is  worth  $100,000, 
$20,000  of  which  are  in  bank  stock.     He  uses  $80,000 
as  a  broker,  in  buying  mercantile  paper.     Suppose  him  to 
be  able  to  effect  a  change  in  the  rate  of  interest,  from 
six  per  cent  per  annum,  to  two  per  cent  a  month,  the  in- 
terest on  his  $80,000     will   be  increased  from  $4,800  to 
$19,200,  making  a  clear  gain  of  $14,400.     At  the  bank  in 
which  he  is  a  director,  and  at  other  banks,  he  obtains  dis- 
counts for  $80,000,  at  six  per  cent  interest  per  annum,  on 
short  paper,  and  pledge  of  his  bank  stock.     Loaning  this 
at  two  per  cent  a  month,  he  makes  a  clear  gain  of  $14,400 
more,  making  with  the  former,  in  one  year,  a  clear  gain 
of  $28,800  over  the  six  per  cent  interest.     By  the  rise  of 
interest  from  six  per  cent  per  annum  to  two  per  cent  a 

27 


210 

month,  H.  increases  his  income  from  $6,000  to  $34,800. 
This  increase  is  paid  to  him  by  merchants  for  money  to 
meet  their  engagements,  and,  consequently,  their  debts 
are  increased  this  sum.  If  interest  had  remained  at  six 
per  cent,  the  broker  would  not  have  borrowed  of  the 
banks,  for  there  would  have  been  no  inducement  to  bor- 
row money  which  he  could  not  re-loan  for  a  higher  rate 
of  interest.  The  money  would,  therefore,  have  been 
loaned  by  the  banks  directly  to  the  merchants  at  six  per 
cent  per  annum,  and  the  merchants  would  have  saved 
$28,800,  which  they  paid  to  the  broker. 

When  banks  curtail  their  discounts,  the  contracts  de- 
pending on  their  issues  must  lie  over  unpaid.  Those  who 
aje  desirous  of  meeting  their  engagements  will  suffer 
themselves  to  be  defrauded  in  the  rate  of  interest,  rather 
than  have  their  paper  protested ;  for  in  a  large  city,  if 
their  paper  lies  over,  their  credit  is  gone,  and  their  busi- 
ness ruined.  They  are  compelled  to  pay  these  exorbit- 
ant rates  of  interest,  however  sensible  they  may  be  of  the 
injustice.  Good  and  evil  are  not  set  before  them  to 
choose  between ;  but  two  evils  are  placed  before  them, 
and  they  must  choose  one  or  the  other.  If  they  wish  to 
do  right,  they  will  choose  the  one  which  they  think  will 
do  the  least  injury  to  themselves  and  their  neighbors ;  but 
to  one  or  the  other  of  the  evils,  to  usurious  interest  or 
bankruptcy,  they  are  compelled  to  submit. 

Such  are,  however,  by  no  means  all  the  evil  conse- 
quences of  speculations  in  money.  Money  is  the  standard 
of  value,  by  which  the  products  of  the  soil,  all  merchan- 
dise, and  the  labor  of  the  people  are  estimated.  The  in- 
comes from  labor  and  products  are  diminished  in  propor- 


tion  to  the  increase  of  the  income  from  money.  The 
change  of  the  rate  of  interest  compels  the  producers  to 
labor  four  times  more  to  clear  $100,  than  before  the  rise 
of  interest.  Each  sum  of  $100  contained  in  the  $28,800 
gained  by  the  broker,  will  purchase  as  many  of  the  pro- 
ducts of  labor,  as  the  $100  gained  by  the  four-fold  toil  of 
producers ;  and  yet  the  broker  has  done  nothing  to  aid 
production  or  distribution,  but  has  retarded  both.  City 
merchants  sell  goods  to  country  merchants,  and  country 
merchants  sell  them  to  farmers  and  mechanics,  from  whom 
they  must  collect  the  money.  But  the  diminished  price 
of  products  puts  it  out  of  the  power  of  mechanics  and  far- 
mers to  pay,  and  thus  the  merchants  are  broken  up. 
Meanwhile  brokers  and  capitalists,  who  are  neither  en- 
gaged in  productive  labor,  nor  in  the  distribution  of  pro- 
ducts, grow  rich  on  the  spoils.  They  are  reverenced  for 
their  wealth,  while  mechanics,  farmers  and  merchants,  who 
have  become  correspondingly  poor,  are  despised  for  their 
poverty,  and  blamed  for  being  unable  to  fulfil  their  en- 
gagements. 

The  following  illustration  shows  the  effect  of  differing 
rates  of  interest  in  different  sections  of  the  country.  A 
merchant  in  New  York  for  goods  sold,  holds  a  $1,000 
note  against  a  merchant  in  Alabama,  which  note  he  en- 
dorses and  has  discounted  at  bank.  The  Southern  mer- 
chant is  not  able  to  take  it  up  when  due,  and  it  is  returned 
to  the  New  York  merchant,  who,  to  preserve  his  credit  as 
endorser,  must  raise  the  money  and  pay  it.  Money  is  so 
scarce  that  he  is  obliged  to  sell  a  note  having  six  months 
to  run,  at  a  discount  of  three  per  cent  a  month.  The 
Alabama  customer  had  abundant  means  to  pay  his  debts, 


212 


but  the  scarcity  of  money  made  it  impossible  for  him  to 
pay  the  note  when  it  was  due.  Some  time  elapses,  and 
the  New  York  merchant  sends  out  the  note  for  $1,000 
*o  Alabama  for  collection.  Meanwhile,  until  the  note  is 
collected,  he  must  borrow  the  money  at  three  per  cent  a 
a  month.  He  raises  the  money,  and  pays  the  returned 
notes  by  selling  other  notes  having  six  months  to  run  at  a 
discount  of  three  per  cent  a  month. 
Discounts  thus  : 

Note  at  six  months $1,219  51 

Three  per  cent  a  month  off  for  six  months  is  eighteen  per  cent 219  51 

$1,000  00 

The  note  for  $1,219  51  falls  due,  and  he  sells  anothei 
note  having  six  months  to  run  at  three  per  cent,  and  with 
the  proceeds  takes  up  the  first  note. 

Thus,  note $1,487  20 

Three  per  cent  a  month  for  six  months=eighteen  per  cent 267  6$ 

$1,219  51 

This  note  falls  due,  and  he  sells  another  six  months* 
note  at  three  per  cent,  and  with  the  proceeds  takes  up  the 
second  note  for  $1,487  20. 

Thus,  note ...^    $1,813  55 

Three  per  cent  a  month  for  six  months= eighteen  per  cent 326  33 


$1,487  20 

This  note  falls  due,  and  he  sells  another  six  months  note 
at  three  per  cent,  and  with  the  proceeds  takes  up  the  third 
note  for  $1,813  55. 

Note* $2,211  64 

Three  per  cent  a  month  for  six  monthfl= eighteen  per  cent 398  091 

$1,813  55 

This  note  falls  due,  and  he  sells  another  six  months  note 
at  three  per  cent,  and  with  the  proceeds  takes  up  the  fourth 
note  for  $2,211  64. 


213 


Note $2,697  11 

Three  per  cent  a  month  for  six  months=eighteen  per  cent 485  47 


64 

Two  and  a  half  years  have  elapsed  since  the  note  in 
Alabama  fell  due.  Being  disappointed  in  its  collection, 
the  New  York  merchant,  to  save  his  credit,  raised  and 
paid  the  money  for  two  and  a  half  years.  From  this 
grew  the  note  now  due  for  $2,697  11.  The  Alabama 
merchant  pays  every  dollar  of  his  note  with  interest  and 
costs  in  New  York  current  funds. 

Thus,  note $1,000  00 

Two  and  a  half  years  interest  at  seven  percent 175  00 


•  $1,175  00 

From  the  increased  note  of  the  New  York  merchant.... , $2,697  11 

Deduct  the  note  and  interest  received  from  the  Alabama  merchant 1,175  00 


Balance  due  by  New  York  merchant  ................................................     $1,522  11 

The  difference  of  interest  on  $1,000  for  two  and  a  half 
years,  causes  a  loss  to  the  New  York  merchant  of 
$1,522  11.  The  interest  amounts  to  more  than  one  and 
a  half  times  the  value  of  the  principal.  The  dollar  is  said 
to  be  the  product  of  labor  ;  but  is  this  difference  of  inter- 
est the  product  of  labor,  or  is  it  a  change  in  the  measure 
of  value  ?  Certainly,  if  the  Alabama  measure,  and  (he 
New  York  measure  were  the  same,  the  debts  would  bal- 
ance each  other.  They  balanced  each  other  two  and  a 
half  years  before,  but  in  this  period  the  thousand  dollars 
in  New  York  have  increased  $1,697  11,  while  $1,000 
in  Alabama,  during  the  same  time,  have  increased  but 
$175.  One  has  accumulated  nine  and  a  half  times  more 
than  the  other.  The  Alabama  merchant  pays  all  he  owes 
the  New  York  merchant,  and  the  latter  appropriates  it  to 
the  payment  of  the  $1,000  which  he  raised  to  take  up  the 


214 

note  of  the  Southern  merchant ;  but  he  still  owes  on  this 
transaction  $1,522.  The  third  person  who  gains  the 
$1,522,  gains  it  without  producing  or  distributing  any 
products. 

The  following  table  exhibits  the  discounts  on  six 
months'  notes  for  a  term  of  sixty  years.  A  thousand  dol- 
lars in  money  are  taken,  and  with  this  sum  a  note  payable 
at  six  months  is  discounted.  When  the  first  note  is  paid, 
a  second  note  having  six  months  to  run  is  discounted  with 
its  proceeds,  and  a  third  note  with  the  proceeds  of  the 
second.  This  calculation  is  continued  on  six  months* 
notes  for  sixty  years.  The  table  shows  the  accumulation 
on  $1,000,  for  sixty  years,  at  the  various  rates  of  1,2,  3, 
4,  5,  6,  7,  8,  12,  18,  24,  and  30  per  cent  per  annum,  taking 
off  the  discount,  as  is  always  done  by  banks  and  brokers. 
The  highest  rate  calculated  is  thirty  per  cent  per  annum, 
or  two  and  a  half  per  cent  a  month,  a  rate  not  nearly  as 
high  as  is  often  paid  in  Wall-street* 


215 


TABLE  OF  DISCOUNTS. 

SHOWING  THE  ACCUMULATION  ON  $1,000  FOR  A  PERIOD  OF  SIXTY  YEARS  BY  DISCOUNTING  NOTES 
HA  VINO  SIX   MONTHS   TO  RUN,  AT  1,  2,  3,  4,  5,  6,  7,  8,  12,  18,  24,  AND  30  ERR  CfiNT  PER 

ANNUM. 


1 

10  years. 

PER  CENT. 

$1  105  45 

5  PER  CENT. 

10  years.     ...      ft  1  .659  24 

12  PER  CENT. 

10  years               $3,447  13 
20      "                  11,881  90 
30      "                  40,957  07 
40     "                141,177  95 
50      «                486,644  91 
60      «              1,677,481  45 

18  PER  CENT. 

10  years               $6,594  35 
20                          43,485  48 
30                       286,758  62 
40                    1,890,988  71 
50                   12,469,831  63 
60                  82,230,496  79 

24  PER  CENT. 

10  years             $12,892  78 
20      «                166,223  76 
30      "             2,143,086  39 
40      «            27,630,338  24 
50      "         356,231,914  13 
60      «•       4,592,819,317  86 

30  PER  CENT. 

10  years             $25,800  11 
20      «                665,645  68 
30      "            17,173,731  66 
40     "          443,084,165  99 
50      "     11,431,620,222  06 
60     "  294,936,059,207  37 

20      " 

1  222  02 

20      " 

2,753  06 

30      " 

1  350  87 

30      " 

4567  97 

40      "    .  . 

1,493  33 

40      «    .. 
50      "    . 

7,579  33 
12,575  87 

50      "    .. 

1,650  78 

60      "    . 

1,824  87 

60      «•    . 

20,866  35 

2 

10  years.. 

PER  CENT. 

$1,222  64 

'       6 
10  years.. 

PER  CENT. 

$1,838  93 

20      "    .. 
30      "    . 

1,494  83 
1  827  63 

20       «    . 

3,381  66 

30       ' 

6218  65 

40      "    .. 
50      "    .. 

2,234  52 
2,732  00 

40       '    .. 
50       <    .. 

11,435  67 
21,029  39 

€0     " 

3340  23 

60       < 

38  671  58 

3  PER  CENT. 

10  years  $1,352  93 
20      «    1,830  46 

30       «•    .                     9  47fi  43 

7 
10  years. 

PER  CENT. 

...      $2039  17 

20      " 

4,158  22 

30      "    .. 
40      "     . 

8,479  32 
.    ..      17,290  79 

40      " 

3  350  44 

50      " 

4  532  91 

50      " 

as  258  90 

60      " 

6  132  73 

60      "    71,898  92 

8  PER  CENT. 

10  years  $2,262  43 
20      "                    5-ilft  /M 

4 
10  years 

PER  CENT. 

$1  497  89 

20      "     . 
30      "      . 
40     «      . 
50      «     . 
60     "     . 

2,243  66 
3,360  75 
5,034  01 
7,540  36 
11,294  60 

30      "    .. 

11,580  46 

40      «'".. 

50      "    . 

26,199  97 
59,275  70 

60      "    .. 

.....    134,107  05 

In  the  foregoing  table  it  appears  that  interest  at  one 
per  cent  would  transfer  $824  worth  of  the  products  of 
labor  to  the  capitalists  to  pay  for  the  use  of  $1,000  for 
sixty  years  ;  at  six  per  cent,  $37,671  58  ;  at  sev- 
en per  cent,  $70,898  92  ;  and  at  thirty  per  cent, 
$294,936,058,207  37. 

In  any  community  the  rise  of  the  rate  of  interest  on  all 
the  money  used,  whether  for  a  longer  or  shorter  period, 
transfers  from  producers  to  capitalists  a  sum  proportioned 
to  the  increase  of  the  rate  per  cent,  as  demonstrated  in 
this  table. 

When  money  becomes  scarce,  and  interest  rises  to  ex- 


216 


orbitant  rates,  the  rates  of  exchange  between  one  city  and 
another,  and  between  one  State  and  another,  always  in- 
crease. These  exchanges  are  merely  a  cover  under 
which  banks  obtain  a  higher  rate  of  interest  than  the  one 
allowed  by  law,  and  a  means  to  enable  them  greatly  to 
increase  their  dividends.  A  slight  notice  of  this  mode  of 
gain  may  be  of  service.  In  1836,  the  banks  in  New  York 
began  to  do  a  business  of  considerable  amount,  by  col- 
lecting notes  on  the  South  and  West,  and  charging  vari- 
ous rates  of  exchange,  from  one  to  three  or  four  per  cent. 
The  discount  at  seven  per  cent  on  a  note  having  three 
months  to  run,  would  be  one  and  three-quarters  per  cent ; 
and  by  charging  three  per  cent  exchange  on  Georgia  or 
other  Southern  States,  it  would  amount  to  four  and 
three-quarters  per  cent  on  the  money  loaned  in  three 
months.  If  their  money  was  returned  free  of  expense, 
these  exchanges  were  much  more  profitable  than  lend- 
ing money  at  seven  per  cent  interest.  To  secure  the 
return  of  the  money  without  loss  or  trouble,  when 
another  person  applied  for  a  discount  of  a  note  pay- 
able in  New  York,  it  was  very  easy  to  tell  him  that  the 
bank  could  not  discount,  that  its  funds  were  locked  up  in 
Georgia  or  elsewhere,  and  that  if  he  were  willing  to  take 
a  draft  on  a  Georgia  bank,  it  would  discount  his  note. 
Being  compelled  to  have  the  money  or  break,  the  appli- 
cant would  take  the  draft  on  Georgia,  and  through  a  bro- 
ker sell  it  in  market.  If  the  bank  did  not  then  buy  the 
draft  back  at  a  discount  of  three  or  four  per  cent,  at  all 
events  by  the  two  transactions  it  would  have  made  its 
funds  payable  in  New  York.  It  would  have  saved  the  ex- 
change of  three  per  cent  on  the  first  note  discounted,  and 


217 


this  would  have  amounted  to  about  double  the  legal  rate 
of  interest.  The  banks  sometimes  made  seven  or  eight 
times  more  in  this  way  than  by  interest.  This  mode  of 
exchanging  spread  through  the  Union ;  and  in  the 
spring  of  1837,  when  the  New  York  banks,  and  the  banks 
generally  suspended  specie  payments,  the  rates  ofexchange 
still  increased. 

To  show  that  the  banks  profited  largely  by  the  embar- 
rassments and  fluctuations  in  1836  and  1837,  we  have  only 
to  notice  the  per  centage  profit  gained  by  them  in  the 
State  of  New  York  at  different  periods. 

The  published  statements  in  the  New  York  assembly 
documents  show  that  the  average  dividends  of  the  Bank 
of  America,  for  ten  years,  from  1818  to  1828,  were 
5  30-100  per  cent  annually.  But  in  the  years  1836  and 
1837,  money  was  very  scarce,  and  the  difficulties  of  the 
community  proportionably  great.  During  these  years  the 
profits  of  the  bank  averaged  more  than  16  14-100  per 
cent  annually.  More  in  one  year  of  embarrassment 
than  in  three  years  of  general  prosperity.  The  same 
published  statements  of  the  following  six  banks,  viz., 
Bank  of  America,  City  Bank,  Mechanics'  Bank,  Mer- 
chants' Bank,  Bank  of  New  York,  and  Union  Bank,  show 
a  result,  as  follows.  During  the  same  ten  years,  from 
1818  to  1828,  their  average  dividends  were  5  70-100  per 
cent  per  annum.  But  in  the  two  years  1836  and  1837, 
their  profits  were  13  35-100  per  cent  annually.  The 
same  statements  rendered  by  fifty-nine  country  banks  in 
this  State,  show  that  in  the  same  two  years,  their  average 
profits  were  11  36-100  per  cent  per  annum. 

To  effect  a  rise  of  interest,  it  is  not  necessary  for  the 

28 


218 


banks  to  allow  their  money  to  lie  dormant  any  length  of 
time.  Let  the  New  York  banks  for  one  week  refuse  to 
discount  a  single  note,  and  the  want  of  money,  would 
probably  be  as  great,  and  as  severely  felt,  as  during  the 
most  difficult  periods  in  1837.  By  this  refusal  the  banks 
would  only  lose  the  interest  on  the  amount  collected  for 
half  the  week.  But  by  the  end  of  the  week  those  who 
needed  money  would  be  obliged  to  sell  paper  having  three, 
six,  nine,  and  twelve  months  to  run,  at  a  discount  of  two 
or  three  per  cent  a  month,  and  would  be  subjected  to  a 
great  loss. 

The  banks  in  the  city  of  New  York  keep  an  average  of 
about  $50,000,000  loaned.  If  the  notes  thus  discounted 
have  an  average  of  fifty-six  days  to  run,  the  citizens  pay 
into  the  banks  six  and  a  quarter  millions  of  dollars  every 
week.  If  for  one  week  the  banks  should  refuse  to  dis- 
count, and  draw  in  the  six  and  a  quarter  millions,  they 
would  lose  the  interest  on  this  sum  for  an  average  of  three 
and  a  half  days.  This  interest  at  six  per  cent  would 
amount  to  $3,557  69.  If  this  curtailment  of  the  circulation 
for  one  week  should  compel  merchants  and  mechanics  to 
sell  their  business  paper,  having  but  sixty  days  to  run,  at 
two  per  cent  a  month  discount,  they  wrould  lose  four  per 
cent  on  the  $6,250,000,  i.  e.,  $250,000.  The  merchants 
and  the  mechanics  would  sustain  a  total  loss  of  $187,500 
over  and  above  interest  for  sixty  days,  at  the  rate  of  six 
per  cent  per  annum  on  $6,250,000. 

Let  us  extend  this  calculation,  and  suppose  the  banks  to 
stop  their  discounts  for  two  weeks,  and  collect  in  their 
dues.  In  the  course  of  two  weeks,  they  would  collect  in 
$12,500,000.  They  would  lose  the  interest  upon  this  sum 


219 


for  an  average  of  one  week,  in  which  time  the  interest 
would  amount  to  $14,230  77.  These  curtailments  would 
produce  an  extreme  scarcity  of  money.  Suppose  the 
merchants  and  the  mechanics  to  be  compelled  to  sell  their 
business  paper  having  six  months  to  run  at  a  discount  of 
two  per  cent  a  month  for  that  period.  They  would  lose 
twelve  per  cent  on  $12,500,000,  i.  e.,  $1,500,000.  Their 
actual  loss  over  and  above  interest,  at  the  rate  of  six  per 
cent  per  annum,  for  six  months,  would  be  $1,125,000, 
while  the  banks  would  lose  only  $14,230  77.  If,  instead 
of  curtailing  their  discounts,  the  banks  should  refuse  to 
loan  to  merchants  and  mechanics,  and  lend  their  money  to 
brokers  and  capitalists,  who  should  re-loan  it  at  the  above 
rates  to  the  people,  the  same  results  would  be  produced 
without  any  loss  of  interest  by  the  banks,  or  any  curtail- 
i*ent  of  their  discounts.  The  $1,125,000  would  be  lost  to 
business  men  and  gained  by  brokers  and  capitalists. 

The  banks  can  curtail  their  discounts  as  much  and  as 
rapidly  as  they  please  without  violating  the  laws.  In  1837 
and  1838,  there  were  not  only  twelve  and  a  half  millions 
of  dollars  loaned  at  two  per  cent  a  month,  but  probably 
some  hundreds  of  millions  were  loaned  at  much  higher 
rates.  One  or  two  per  cent  a  day  was  often  extorted  from 
the  needy.  Many  merchants  and  mechanics  in  New  York 
might  be  mentioned,  who  paid  from  $10,000  to  $50,000 
in  extra  interest,  that  is,  interest  over  seven  per  cent 
before  they  were  compelled  to  suspend  payment.  Besides, 
when  collections  were  made  for  them  in  the  various 
States  by  banks  and  otherwise,  they  were  subjected  to 
great  losses  in  exchanges  on  their  drafts. 

Millions  of  dollars'  worth  of  the  best  paper  was  sold  at 


220 


a  discount  of  three  per  cent  a  month.  Take  the  discount 
off  in  advance,  at  this  rate,  from  six  months'  paper,  and 
$1,000  will  buy  a  note  for  $1,219  50.  At  the  maturity  of 
this  note,  its  proceeds,  i.  e.,  $1,219  50  will  buy  a  second 
note  having  six  months  to  run  for  $1,487  18.  Thus  it  is 
seen  that  the  indebtedness  of  those  paying  this  rate  of  in- 
terest was  increased,  in  one  year,  almost  fifty  per  cent  on 
all  the  money  they  borrowed  to  meet  their  engagements. 

Curtailments  of  bank  discounts,  made  under  pretence 
of  getting  people  out  of  debt,  increase  instead  of  di- 
minishing their  indebtedness.  They  inevitably  retard 
the  sale  of  products,  and  destroy  the  regularity  of 
business.  If  the  inhabitants  of  the  State  of  New  York 
ordinarily  pay  interest  on  four  hundred  millions  of  dollars, 
and  one-half  this  sum,  i.  e.,  two  hundred  millions,  were 
loaned  at  two  per  cent  a  month,  their  indebtedness 
would  be  increased  on  this  one  item  thirty-six  millions  of 
dollars  above  the  interest  at  six  per  cent  per  annum  ;  and 
this,  too,  without  taking  the  interest  in  advance,  which  is 
usually  done  in  cases  of  this  nature.  In  all  these  transac- 
tions, by  which  thirty-six  millions  of  dollars  would  be  taken 
from  producers  and  distributers,  and  transferred  to  capi- 
talists, there  would  be  no  exchange  of  products,  and  the 
people  would  receive  no  consideration  for  their  money. 

Besides  the  suffering  caused  by  the  increase  of  indebt- 
edness upon  loans  of  money,  the  prices  of  products  would 
be  greatly  diminished.  Those  sold  would  not,  perhaps, 
cancel  more  than  one-half  of  the  debts  that  they  would  if 
the  rate  of  interest  were  not  increased.  Therefore,  the 
money  engrossed  by  the  capitalist  would  be  worth  to  him 
double  the  same  sum  at  the  usual  interest,  for  he  could 


221 


purchase  with  it  nearly  double  the  quantity  of  products 
that  he  could  under  ordinary  rates. 

A  man  who  owns  a  farm  cannot  rent  it  for  thirty  or 
sixty  days,  and  force  its  return,  and  keep  constantly  re- 
letting  it,  so  as  to  inconvenience  his  tenants ;  because,  in 
these  short  periods  the  farm  would  not  produce  a  crop ; 
but  money  will  gather  an  income  when  it  is  loaned  for 
thirty  or  sixty  days,  or  for  one,  two,  or  three  days.  Many 
men  now  devote  their  time  to  the  loaning  of  money  for 
one-eighth,  one-quarter,  one-half,  and  one  per  cent  a  day, 
fixing  a  higher  or  a  lower  rate,  according  to  the  necessity 
of  the  borrower.  In  this  way  they  extort  the  largest  pos- 
sible interest.  This  they  say  they  do  "  to  keep  people 
from  breaking."  Doubtless  many  of  those  engaged  in 
brokerage  are  ignorant  of  the  effects  of  their  stock-jobbing 
and  loaning  operations  upon  the  welfare  of  their  fellow- 
men,  and  not  any  of  them  appreciate,  in  their  full  extent, 
the  evils  they  occasion,  or  they  would  cease  to  pursue  an 
employment  so  blighting  to  their  own  moral  characters, 
and  so  pernicious  to  the  welfare  of  others. 

In  1837,  rents  on  stores  fell  to  one-half  or  one-quarter 
of  their  former  prices,  and  many  stood  untenanted.  At 
the  same  time,  bank-notes  which  a  year  or  two  before 
could  be  rented  at  but  six  or  seven  per  cent  per  annum, 
were  rented  at  from  three  to  ten  times  more  than  before, 
although  at  the  former  time  the  bank-notes  were  profess- 
edly based  on  specie,  and  at  the  latter,  no  pretension  of 
this  sort  was  made.  Was  the  rise  of  interest  on  the  bank- 
notes, or  money,  caused  by  an  increase  of  labor  to  engrave 
and  secure  the  notes,  or  was  the  fall  of  rent  on  stores 
caused  by  a  diminution  of  the  number  of  bricks,  or  the 


222 


amount  of  labor  necessary  to  build  them  ?  No  !  it  was  an 
arbitrary  rise  of  interest  to  increase  the  gains  of  banks, 
brokers,  and  capitalists.  Our  producers  were  not  idle  : 
we  had  a  superabundance  of  products  for  our  market ; 
yet,  strange  as  it  may  seem,  thousands  in  our  midst  were 
suffering  for  the  very  things  of  which  the  abundance  was 
the  subject  of  lamentation.  One  had  raised  a  surplus  of 
some  product,  and  was  in  need  of  a  surplus  product  own- 
ed by  another.  But  it  was  nearly  impossible  to  effect  any 
exchange  of  these  products,  on  account  of  the  scarcity  of 
money.  At  this  juncture,  the  situation  of  producers  in 
Europe  was  similar  to  that  of  producers  in  the  United 
States.  The  Bank  of  England  was  openly  authorized  to 
increase  the  rate  of  interest  on  her  loans,  in  order  to  check 
over-production  and  over-trading. 

How  different  would  have  been  the  condition  of  the  pro- 
ducing classes  if  the  banks  had  pursued  an  opposite  course. 
If,  instead  of  raising  the  interest  on  their  loans,  and  in- 
creasing their  dividends  to  double  their  amount  in  previous 
years,  they  had  lowered  the  rate  of  interest  so  as  to  di- 
minish their  dividends  to  one-half  their  previous  amount, 
the  prosperity  of  the  producing  classes  would  have  as 
greatly  exceeded  their  prosperity  in  former  years,  as  it 
was  by  the  rise  of  interest  diminished  below  their  former 
prosperity.  The  amount  of  bank  loans  would  have  been 
less.  Probably  money  would  have  circulated  with  more 
than  double  its  former  rapidity.  One  million  of  dollars 
circulating  rapidly  will  accomplish  as  much  in  a  given 
time  as  two  millions  will  if  the  latter  circulate  but  half  as 
fast. 

If  in  January,  1836,  the  banks  throughout  the  Union 


223 


had  reduced  their  rate  of  interest  to  four  per  cent,  and 
loaned  their  money  to  business  men  for  good  endorsed 
notes,  if  they  had  made  no  loans  on  pledge  of  stocks  as 
security,  or  to  any  one  who  they  knew  desired  to  re-loan 
the  money  at  an  advanced  rate  of  interest,  business  would 
have  been  attended  with  increased  prosperity ;  country  pro- 
ducts would  have  maintained  good  prices ;  the  State 
bonds  of  every  State  in  the  Union,  bearing  an  interest  of 
five  per  cent  per  annum,  would  have  been  above  par ; 
every  State  would  have  paid  the  interest  on  her  bonds 
promptly,  and  in  January,  1837,  the  people  would  not 
have  owed  as  much  by  a  very  large  amount  as  they 
were  compelled  to  owe  under  the  actual  circumstances. 
The  producing  classes  would  have  been  comparatively 
well  off,  and  large  capitalists  would  not  have  become 
so  immensely  rich.  State  stocks  would  not  have  been 
crowded  upon  the  market,  nor  would  capitalists  have 
become  competitors  with  the  business  community  for 
loans  at  banks.  The  producing  classes  cannot  afford 
to  pay  even  four  per  cent  per  annum,  but  there  would 
be  less  distress  among  them  at  this  rate,  than  at  six  per 
cent,  or  at  a  higher  rate.  Their  subsistence  will  always 
become  scanty  in  proportion  to  the  increase  of  rates  of 
interest. 

If  the  English  government  should  raise  the  interest  on 
its  debt  to  four  per  cent,  the  taxes  of  producers  would  be 
increased  in  the  same  proportion.  But  if  it  should  lower 
the  interest  on  its  debt  to  one  per  cent,  and  compel  the 
Bank  of  England,  and  all  bankers  to  take  only  one  per 
cent  on  the  endorsed  notes  of  individuals,  and  to  make  no 
loans  on  pledges  of  stocks  as  security,  the  producing 


224 

classes  of  England  would  be  elevated,  and  their  share  of 
their  own  surplus  products  would  be  increased  in  pro- 
portion to  the  diminution  of  the  rate  of  interest. 

The  curtailments  of  bank  discounts  seem  to  be  made 
that  producers  may  know  and  consider  the  great  value  of 
money,  and  the  comparative  worthlessness  of  the  produc- 
tions of  labor.  It  would  seem  that  the  principal  wealth  of 
a  nation  may  be  dug  out  of  some  obscure  place  in  the 
earth,  collected  into  a  very  small  compass,  and  placed  in 
the  vaults  of  banks.  It  there  remains  as  inactive  as  it  was 
in  the  mines  before  it  was  excavated.  This  gold  and  sil- 
ver gives  power  to  the  banks,  the  Board  of  Brokers,  and 
a  few  large  capitalists,  to  compel  the  people  to  cultivate 
the  earth,  and  to  gather  and  market  its  productions  mainly 
for  their  use,  reserving  for  themselves  of  the  poorer  kinds 
a  bare  subsistence. 


225 


SECTION  VI. 
REMARKS   ON  THE    REPEAL   OF   THE   USURY   LAWS. 

In  the  course  of  the  few  past  years,  numerous  petitions 
have  been  presented  to  the  legislature  of  the  State  of  New 
York,  praying  for  the  repeal  of  the  Usury  Laws.  It  is 
proposed  that  in  loaning  money  the  rate  of  interest  should 
be  agreed  upon  between  borrowers  and  lenders,  as  the 
prices  of  merchandise  are  agreed  upon  between  buyers 
and  sellers.  The  position  assumed  by  those  in  favor  of 
abolishing  the  Usury  Laws  is,  that  the  competition  be- 
tween the  lenders  of  money  would  be  so  great  as  to 
reduce  the  rate  of  interest  below  seven  per  cent.  But 
such  would  not  be  the  result.  There  is  now  no  law 
against  competition  at,  or  below,  seven  per  cent ;  there- 
fore the  competition  at  seven  per  cent  and  under  this 
rate,  could  not  be  increased  by  annulling  the  restriction. 

Another  argument  for  the  abolition  of  a  legal  rate  of  in- 
terest is,  that  the  laws  against  usury  are  continually  vio- 
lated. In  large  cities,  money  is  often  loaned  at  from  one 
to  three  per  cent  a  month,  at  a  quarter  and  a  half  per  cent 
a  day,  and  sometimes  even  at  one  or  two  per  cent  a  day, 
and  the  legal  rate  of  seven  per  cent  per  annum  does  not 
govern  the  money-market ;  it  is  therefore  argued  that  the 
law  must  be  wrong ;  and  if  the  price  to  be  paid  for  the 
use  of  money  were  left  open  to  competition,  the  demand 
and  supply  would  equitably  regulate  the  rate  of  interest. 

29 


226 

The  idea  commonly  held  out  is,  that  the  rates  of  inter- 
est would  be  lower  if  the  Usury  Laws  were  abolished ; 
and  anticipating  this  result,  many  are  induced  to  sign  the 
petitions.  There  is  reason  to  believe  that  the  principal 
originators  of  these  petitions  are  those  who  are  now  in- 
fringing the  laws  by  exacting  extra  rates  of  interest,  and 
who  would  like  to  have  their  extortions  legalized.  They 
do  not  advocate  the  chartering  of  banks  without  restric- 
tions upon  their  rates  of  interest.  Banks  should  lend 
money  at  the  legal  rates.  Then  a  few  capitalists  would 
borrow  large  sums  from  them,  and  discounts  would  be  re- 
fused to  business  men,  who  would  be  compelled  to  borrow 
money  from  these  capitalists  at  the  rates  of  interest  for 
which  they  would  agree  to  lend  it.  The  necessity  of  the 
borrower,  and  the  avarice  of  the  lender,  would  fix  the  rate 
of  interest.  If  a  capitalist  could  borrow  from  a  bank 
$10,000  for  ninety  days,  at  six  per  cent  per  annum,  and 
re-loan  it  at  three  per  cent  a  month  to  a  man  who  must 
have  the  money  or  break,  he  would  make  by  the  operation 
a  clear  gain  of  $750.  Annul  the  laws  against  usury,  and 
this  kind  of  business  would  be  far  more  extensive  than  it 
now  is ;  but  under  the  existing  laws,  more  of  it  is  done 
than  is  for  the  benefit  of  the  public. 

Other  arguments  advanced  in  favor  of  abolishing  the 
Usury  Laws,  are  such  as  these.  It  is  said  when  goods  are 
sold  on  a  credit,  a  greater  difference  is  made  in  their  price 
than  tljp  interest  at  seven  per  cent  per  annum  for  the  time 
of  the  credit,  and  it  is  therefore  right  that  lenders  should 
receive  higher  rates  of  interest  for  their  money.  People 
are  not  aware  that  the  high  and  fluctuating  rates  of  inter- 
est on  money  are  the  cause  of  the  extra  prices  charged 


227 


for  credits  on  sales  of  goods.  Suppose  a  merchant  is 
obliged  to  turn  his  goods  into  money  to  pay  a  debt.  He 
sells  them  on  six  months'  credit,  taking  the  purchaser's 
note,  on  which  he  pays  two  and  a  half  per  cent  a  month 
discount  to  obtain  the  cash.  He  could  as  well  afford  to 
take  fifteen  per  cent  from  the  goods  as  fifteen  per  cent 
from  the  note.  The  purchaser  of  the  goods  who  cannot 
pay  the  money  even  when  offered  this  large  discount  off 
his  note,  is  not  as  safe  for  the  payment  of  his  note  as  he 
would  be  if  others  could  not  get  so  large  a  discount  by 
paying  cash.  It  gives  a  man  who  can  pay  the  money 
great  advantage  over  one  who  cannot,  for  if  the  latter  pay 
fifteen  per  cent  on  the  cost  of  his  goods  for  six  months' 
possession,  the  buyer  for  cash  can  undersell  him.  If 
money  could  be  always  easily  borrowed  at  a  uniform  and 
low  rate  of  interest,  the  difference  between  sales  for  cash 
and  credit  would  vary  but  little  from  the  rate  of  interest ; 
for  if  interest  were  at  a  just  rate,  there  would  be  few  bad 
debts,  and  a  very  small  per  centage  on  goods  would  guard 
against  all  losses  from  this  cause. 

Another  proposition  is,  that  the  Usury  Laws  should  be 
taken  off  from  all  four  months'  paper,  and  the  rate  of  in- 
terest on  longer  loans  restricted,  as  if  four  months'  paper 
were  governed  by  different  principles  from  that  having  six 
or  eight  months  to  run.  It  would  be  hard  to  show  how 
selling  four  months'  notes  at  exorbitant  rates  of  interest 
would  save  the  credit  and  property  of  business  men.  If, 
at  the  end  of  the  first  four  months,  the  merchant  be  obliged 
to  sell  a  second  four  months'  note  at  the  same  rate,  is  he  any 
better  off  than  if  he  had  at  first  sold  one  of  eight  months,  in- 
stead of  the  two  four  months'  notes  ?  If  it  were  legal  to 


228 


demand  as  high  a  rate  of  interest  as  could  be  obtained  on 
paper  not  having  more  than  four  months  to  run,  paper  for 
longer  dates  would  be  unsalable  whenever  interest  on  the 
short  paper  was  high.  Usurers  now  say  that  they  take  a 
higher  rate  of  interest  on  account  of  the  risk  they  incur 
by  lending  at  a  rate  not  allowed  by  law.  Hence,  if  they 
could  legally  demand  two,  three,  or  four  per  cent  a  month 
discount  on  four  months'  paper,  they  would  ask  still  higher 
rates  for  discounting  six  months'  paper,  to  pay  for  the  haz- 
ard of  the  illegal  act  Besides,  if  any  rate  of  interest 
which  people  would  agree  to  pay  for  money  for  four  months 
were  made  legal,  whenever  the  rate  of  interest  was  high 
those  who  owed  money  on  bond  and  mortgage  would  prob- 
ably be  called  upon  for  payment.  If  they  could  not  pay, 
the  holders  of  the  mortgages  would  give  them  four  months 
time,  and  take  a  new  bond  for  the  time,  very  likely  at  two 
or  three  per  cent  interest  a  month.  In  the  city  of  New 
York  there  is  probably  a  larger  amount  loaned  on  bond  and 
mortgage,  that  is  now  due,  than  the  amount  of  all  the  cap- 
itals of  banks  in  the  city.  Nearly  all  our  Insurance  Com- 
panies loan  their  money  thus  on  one  year's  time,  but  do 
not  expect  to  call  for  it  so  long  as  the  interest  is  regularly 
paid,  unless  they  meet  with  great  losses.  A  large  propor- 
tion of  these  mortgages  is  due.  Many  millions  are  loaned 
by  individuals  and  executors  of  estates,  and  perhaps  a  very 
large  proportion  of  these  would  be  called  for,  in  order  to 
obtain  the  higher  rates  of  interest.  The  people  would  be 
obliged  to  pay  almost  any  rates  that  the  owners  of  the 
mortgages  chose  to  exact ;  otherwise  their  property  would 
be  sold  to  satisfy  the  debts.  Either  course  would  break 
up  a  large  proportion  of  the  debtors,  and  their  property 


229 


would  pass  over  to  their  creditors  for  half,  or  less  than 
half,  its  value. 

Another  proposed  modification  of  the  law  is,  that,  if  the 
money-lender  obtain  from  the  borrower  an  agreement  to 
pay  more  than  seven  per  cent  interest  per  annum,  and 
prosecute  his  claim  for  the  recovery  of  the  debt,  he  shall 
be  allowed  to  collect  no  more  than  the  sum  loaned  and 
seven  per  cent  interest.  Could  any  honest  man  propose  a 
law  for  the  prevention  of  theft,  the  only  penalty  of  which, 
in  case  of  detection,  should  be  the  restoration  of  the 
goods  ? 


SECTION  VII. 

A  WELL-REGULATED  CURRENCY  IMPOSSIBLE  UNDER  PRE- 
SENT LAWS. 

Our  whole  banking  system  is  based  upon  a  credit  given 
by  law  to  bank-notes,  for  which  the  people  furnish  the  se- 
curity in  their  endorsed  notes  and  State  bonds.  The 
legal  representative  has  no  value  in  itself ;  it  rests  upon  ac- 
tual capital,  the  earth  and  its  productions,  and  not  upon 
the  inherent  value  of  its  material.  It  may  then  be  asked, 
why  the  State  government  cannot  bank  on  the  same 
security,  and  appropriate  the  gains  to  the  public  benefit, 
instead  of  allowing  a  few  individuals  to  acquire  large 
fortunes  by  private  banking.  But  bank-notes  issued  by 
a  State  would  soon  depreciate*  The  currency  must  be 


230 


national,  and  pass  equally  well  in  all  sections  of  the  coun- 
try. If  a  State  should  make  paper-money  a  tender,  (and 
this  is  forbidden  by  the  Constitution,)  the  money,  like  the 
money  of  the  banks  chartered  by  the  State,  must  neces- 
sarily be  redeemed  with  specie  to  secure  public  confi- 
dence. But  this  local  redemption  would  make  the  money 
of  unequal  value  in  different  sections  of  the  Union.  An- 
other difficulty  would  be  incurred  by  a  State  bank,  that 
unless  a  few  of  the  largest  capitalists  were  included  as 
stockholders,  and  the  interest  of  the  wealthiest  men  iden- 
tified with  the  bank,  it  would  soon  be  compelled  to  suspend 
payments. 

A  United  States  Bank  could  not  regulate  the  currency. 
Before  the  General  Government  could  establish  the  insti- 
tution, it  would  be  obliged  to  consult  a  few  large  capital- 
ists to  ascertain  whether  they  would  take  the  stock.  II 
the  charter  were  not  one  which  would  probably  secure  an 
income  as  good  or  better  than  any  other  investment,  cap- 
italists would  refuse  the  stock,  and  the  government  could 
not  establish  the  bank.  If  the  government  should  deem 
three  per  cent  a  just  rate  of  interest,  and  should  limit  the 
dividends  at  this  rate,  the  stock  would  not  be  taken.  But 
should  it  allow  six  per  cent  interest,  and  leave  the  divi- 
dends unlimited,  both  native  and  European  capitalists  would 
call  it  a  good  investment  for  money,  if  they  could  retain 
sufficient  control  of  the  institution. 

If  under  our  present  laws  making  all  notes  redeemable 
in  specie,  the  General  Government  should  establish  a  bank, 
and  issue  enough  paper-money  for  all  business  transac- 
tions, at  a  low  rate  of  interest,  our  large  capitalists  would 
array  themselves  against  it  by  collecting  their  debts  in 


231 

bank-notes,  and  demanding  specie  from  the  bank.  Such 
a  bank,  established  on  a  specie  basis,  could  not  be  sus- 
tained a  month.  The  government  and  all  the  produ- 
cers could  not  prevent  its  total  failure. 

Monetary  laws  are  the  most  important  subjects  for  le- 
gislation. It  is  the  duty  of  every  national  government  to 
institute  and  regulate  the  medium  of  exchange ;  but  that 
this  duty  has  been  imperfectly  discharged,  appears  from 
the  fact  that  where  specie  is  made  the  only  tender  for  the 
payment  of  debts,  neither  the  government  nor  the  mass  of 
the  people  have  had  or  can  have,  any  adequate  control  over 
it.  Capitalists  control  the  money,  and  through  the  money 
control  the  government.  The  defect  of  the  present  mone- 
tary laws,  farther  appears  from  the  variations  in  the  rates 
of  interest  on  government  stocks,  perfectly  secured  at  all 
times,  but  constantly  fluctuating  in  value.  If  the  govern- 
ment does  not  secure  a  uniform  value  to  money  for  its 
own  use,  how  can  it  be  said  to  regulate  the  currency  of 
the  country. 

It  is  impossible  to  secure  to  labor  its  earnings,  under 
systems  by  which  the  government  and  the  people  depend 
upon  a  few  capitalists  to  furnish  the  medium  and  standard 
for  the  distribution  of  the  productions  of  labor.  In  the 
plan  about  to  be  developed,  the  whole  people,  through 
Congress,  would  hold  the  power,  and  fix  the  rate  of  in- 
terest. They  can  by  a  vote  put  the  system  in  suc- 
cessful operation  without  consulting  capitalists,  banks  or 
brokers. 


CHAPTER  V. 

I 

•     V  >  ,  '•     : 

THE    AMOUNT   OF   A    CURRENCY   SHOULD   BE    LIMITED  ONLY 
BY    THE   WANTS   OF   BUSINESS. 

IT  is  indispensable  to  the  regulation  of  the  currency 
that  the  amount  of  money  should  be  limited  only  by  the  wants 
of  business.  It  has  been  already  shown  that  the  value  of 
money  is  determined  by  its  income,  or  rate  of  interest. 
This  proposition  being  established,  it  follows,  that  if  the 
interest  be  regularly  maintained,  the  amount  of  money  may 
be  unrestricted  without  decreasing  its  value. 

The  following  illustration  will  show,  that  no  laws 
against  usury  can  prevent  the  oppression  and  evil  conse- 
quent to  a  limited  amount  of  money. 

Suppose  a  nation  consisting  of  one  hundred  thousand 
persons  to  frame  their  own  government  and  laws.  They 
make  gold  and  silver  coins  the  legal  currency,  and  fix  the 
rate  of  interest  at  six  per  cent.  Severe  penalties  are  af- 
fixed to  the  exaction  of  a  higher  rate,  and  to  the  exporta- 
tion of  money  from  the  country.  This  nation  has  in  coin 
$12  to  each  inhabitant ;  probably  as  much  as  any  people, 
however  wealthy,  can  keep  in  active  circulation.  The 
specie  in  the  nation  amounts  to  $1,200,000.  Twenty  men 
become  worth  $100,000  each,  together  $2,000,000.  One 
million  is  loaned  on  bond  and  mortgage  and  business 


233 


notes  at  the  legal  rate.  When  all  the  money  of  the  nation 
is  in  active  use,  the  twenty  men  determine  to  call  in  thirty 
per  cent  of  their  loans,  and  hold  the  money  for  a  week  or 
a  month  in  order  to  make  a  more  profitable  re-investment. 
This  takes  out  of  circulation  $300,000,  one-fourth  of  the 
whole  circulating  medium,  and  causes  a  great  scarcity  of 
money.  One-fourth  of  the  debts  in  the  nation  lie  over  un- 
paid, for  all  the  money  was  before  required  to  meet 
contracts.  The  twenty  men  hold  only  their  own  money, 
and  no  law  can,  or  should  compel  them  to  use  it.  They 
do  not  take  more  than  the  legal  rate  of  interest.  Let 
these  men  hold  their  money  for  six  months,  until  the 
unpaid  debts  are  mostly  collected  by  suits  at  law,  and  the 
twenty  men  and  other  owners  of  money,  can  buy  the 
property  of  debtors  at  less  than  half  its  value.  All  se- 
curities depreciate,  and  confidence  is  lost  in  the  value  of 
property,  and  in  the  ability  of  debtors  to  discharge  their 
obligations.  Yet  no  money  leaves  the  country,  nor  is  any 
change  made  in  the- rate  of  interest. 

Twelve  hundred  thousand  dollars  is  an  abundance  of 
money  for  a  population  of  a  hundred  thousand  persons.  If 
we  allow  it  to  pass  from  one  individual  to  another  three 
times  a  week,  (and  money  passes  much  oftener  in  cities,) 
the  $1,200,000  would  pay  $3,600,000  of  debts  every  week, 
and  in  a  year  $187,200,000.  Notwithstanding  this  abun- 
dance, these  few  individuals  can  easily  affect  the  money 
market,  and  greatly  increase  their  wealth  by  purchasing 
property  at  reduced  rates,  and  selling  it  when  the  depres- 
sion ceases.  If  the  amount  of  money  for  each  inhabitant 
were  increased  to  $20,  the  aggregate  amount  would  be 
but  $2,000,000,  and  the  twenty  men  would  be  worth  as 

30 


234 


much  as  the  whole  currency  of  the  nation,  and  could  easily 
keep  enough  in  their  own  possession  to  effect  the  same 
results.  The  government  is  powerless  to  prevent  these 
evils,  for  the  amount  of  money  is  limited,  and  a  few  indi- 
viduals have  the  control  of  it. 

In  the  United  States  within  a  few  years,  in  times  of 
scarcity  of  money,  cows  were  sold  at  sheriff's  sale  at 
from  $2  to  $5;  good  horses  at  from  $3  to  $10;  and 
cultivated  lands  for  a  few  cents  an  acre,  when  they  cost 
their  owners  nearly  as  many  dollars.  When  money  be- 
came plenty  again,  these  cows,  horses,  and  lands  rose  to 
perhaps  quite  their  former  price.  No  nation  should  fix 
upon  a  standard  of  value  of  limited  amount.  For  a  limited 
amount  of  money,  even  at  a  uniform  interest,  will  enable 
the  owners  of  money  to  monopolize  the  property  of  the 
nation. 

The  State  of  New  York  has  a  population  of  2,500,000. 
Multiply  this  by  $12,  and  we  have  $30,000,000,  a  much 
larger  sum,  doubtless,  than  is  kept  in  active  circulation  in 
our  State.  Still,  there  are  probably  two  men  in  the  State 
who  are  worth  more  than  this  sum ;  and  who  can,  when- 
ever they  choose,  affect  not  only  the  money  market  of  this 
State,  but  also  that  of  every  State  in  the  Union.  Neither 
the  State  government,  nor  the  General  Government  has 
power  to  prevent  it,  nor  to  relieve  the  people. 

A  certain  amount  of  money  is  required  to  fulfil  the  bu- 
siness engagements  of  a  nation.  If  one-fourth  of  that 
amount  be  withheld  from  circulation,  one-fourth  of  the 
contracts  must  remain  unpaid.  A  high  price  charged  for 
the  remaining  three-fourths,  will  not  enable  them  to  sup- 
ply the  place  of  the  absent  one-fourth,  which  is  indispen- 


235 


sable  to  the  prosperity  of  business.  No  country  can  be 
prosperous,  while  capitalists  can  cause  a  scarcity  of 
money.  Their  legal  right  to  withdraw  their  money  from 
circulation  cannot  be  denied;  but  the  exercise  of  this 
right  should  not  operate  to  the  injury  of  others.  Some 
public  means  must  be  devised  whereby  the  requisite 
amount  of  money  for  the  people  may  always  be  supplied, 
at  the  legal  rate  of  interest.  No  government  should 
make  a  currency  of  a  material  of  which  it  cannot  supply  a 
quantity  adequate  to  the  wants  of  the  people. 


CHAPTER   VI. 


THE    NECESSITY    OF    CREDIT,    AND    ITS   EXTENSIVE    USE    IN 
THE    TRANSACTIONS    OF    BUSINESS. 

To  credit  is  to  trust  our  property,  or  the  reward  for  our 
labor,  in  the  hands  of  others  for  a  limited  time.  Govern- 
ments could  not  exist,  nor  legislative  bodies  meet,  without 
credit.  The  members  of  Congress  trust  the  government 
to  pay  their  travelling  expenses,  and  the  nation  trusts 
the  government  with  funds  for  that  purpose.  We  con- 
tinually trust  our  fellow-men.  The  laborer  who  works 
by  the  day  trusts  his  employer  until  evening  for  his  wa- 
ges. If  the  employer  pay  in  advance,  he  trusts  the  la- 
borer. Daily  laborers  are  supposed  to  incur  little  risk  by 
trusting  their  employers,  but  in  the  city  of  New  York 
they  have  lost  large  amounts  in  this  way.  The  clergy- 
man trusts  his  parish  for  his  salary ;  the  teacher  the  pa- 
rents of  the  children;  colleges  their  students,  &c.,  &c. 
Houses  could  not  be  rented  without  credit ;  the  owner 
credits  the  tenant  with  the  use  of  his  property ;  the  tenant 
may  injure  or  destroy  it.  If  it  be  insured,  he  trusts  the 
insurance  company  to  indemnify  him  for  loss  by  fire. 
If  the  tenant  pay  rent  in  advance,  the  house  may  be 
burned,  and  he  may  lose  his  money.  Banks  could  not  ex-> 
ist  without  credit.  The  people  credit  the  banks  on  their 


237 

bank-notes,  and  the  banks  credit  the  people  on  their  en- 
dorsed notes.  The  people,  too,  trust  the  banks  with  de- 
posits. A  very  large  proportion,  at  least  ninety  or  ninety- 
five  per  cent  of  the  exchanges  of  productions,  is  made  on 
a  longer  or  shorter  credit.  All  merchandise  sent  by  man- 
ufacturers to  commission  merchants  in  our  cities,  is  trust- 
ed in  the  hands  of  the  latter.  A  very  large  proportion  of 
this  merchandise  is  sold  on  a  credit  of  six  or  eight  months 
to  jobbers,  and  is  then  re-sold  by  them  to  retailers  on 
credit,  who  again  sell  to  consumers  mostly  on  credit. 
Nearly  all  our  internal  improvements  are  contracted  for 
on  a  certain  time  of  credit.  A  considerable  proportion  of 
these  contracts  are  paid  for  by  borrowing  money  on 
mortgage  of  the  improvements.  Even  goods  sold  for 
cash  are  usually  delivered  before  payment.  Except  on  an 
exceedingly  limited  scale,  exchanges  of  productions  could 
not  be  made  without  credit.  Neither  the  General  Gov- 
ernment nor  the  State  governments  could  raise  money  at 
home  or  abroad  without  it.  Our  country  could  never 
have  achieved  its  independence  without  the  money  it  ob- 
tained upon  credit. 


CHAPTER   VII. 


OF     THE     SECURITY   OF    A    PAPER     CURRENCY. 

IT  has  been  proved  in  our  foregoing  arguments,  that  the 
amount  of  a  currency  should  be  equal  to  the  wants  of  the 
people,  and  that  gold  and  silver,  of  which  the  quantity  is 
necessarily  limited,  are  not  the  proper  materials.  It  re- 
mains to  be  proved  that  a  paper  currency  can  be  estab- 
lished, which  shall  be  always  adequate  in  amount,  and 
which  can  be  maintained  at  a  uniform  value.  The  present 
chapter  will  offer  some  considerations  of  the  security  and 
competency  of  a  paper  currency,  as  a  medium  of  exchange. 

First,  we  may  notice  some  of  the  ways  in  which  paper 
is  now  used,  and  in  which  a  legal  power  expressed  upon 
it  is  deemed  sufficient  security.  All  titles  to  land,  all 
loans  of  money  on  bond  and  mortgage  or  otherwise,  the 
payments  for  all  lands,  and  of  every  other  species  of 
property  on  a  credit,  are  secured  by  paper.  These  papers 
must,  of  course,  be  m#de  legal  liens  upon  property  or 
they  would  be  worthless,  for  their  value  must  consist  in 
their  control  of  real  property,  and  not  in  any  worth  inher- 
ent in  their  substance.  Money,  of  every  description,  gold, 
silver,  or  paper,  is  created  by  the  laws,  and  its  value  con- 
sists in  its  being  made  by  law  a  public  lien  upon  all 
property  for  sale. 


239 


The  difference  between  a  private  obligation,  such  as  a 
mortgage,  or  note  of  an  individual,  and  money,  is,  that  the 
two  former  are  private  liens,  one  on  a  specific  piece  of 
property,  the  other  on  any  or  all  the  property  of  an  indi- 
vidual. But  money  is  a  public  lien  on  all  property  for  sale, 
whether  that  property  be  owned  by  individuals  or  by  the 
government.  Between  individuals  and  the  government, 
the  law  secures  the  fulfilment  of  contracts  by  mortgages 
and  other  paper  instruments.  If  paper  instruments  can 
be  made  safe  representatives  of  property  between  two  in- 
dividuals, no  good  reason  is  perceived  why  paper  instru- 
ments cannot  be  made  safe  representatives  of  property 
between  any  number  of  individuals.  If  paper  instruments 
can  be  made  representatives  of  property  for  limited  pe- 
riods of  time,  no  good  reason  is  perceived  why  they  can- 
not be  made  safe  representatives  of  property  when  made 
payable  on  demand.  And  if  made  payable  on  demand  in 
something  capable  of  producing  an  immediate  income, 
they  are  then  made  competent  to  fulfil  all  the  uses  of 
money;  for  money  can  have  no  other  use  than  to  ex- 
change for  property,  or  to  loan  for  an  income. 

We  will  observe  how  paper-money  now  circulates. 
Bank-notes  are  called  money,  although  the  laws  do  not 
make  them  a  tender  for  debts.  Banks  are,  however,  char- 
tered by  law,  and,  therefore,  the  bank-notes  issued  by 
them  are  generally  considered  as  money,  and  answer  all 
its  purposes.  They  are  founded,  or  based  on  a  promise 
to  pay  specie  on  demand.  Let  us  see,  however,  if  they 
are  not  practically  money,  instead  of  being  merely  rep- 
resentatives of  gold  and  silver  coins.  A  man  exchanges  at 
a  bank  in  New  York  a  hundred  dollars  in  specie  for  a 


240 


one  hundred  dollar  bank-note,  and  takes  it  to  the  Western 
country  to  buy  land.  The  note  is  thus  put  in  circulation 
there,  is  loaned  and  re-loaned  on  interest,  and  is  used 
in  the  purchase  of  property  and  products.  It  is  continu- 
ally active,  while  the  silver  for  which  the  bank-note  was 
taken  in  lieu,  lies  dead  in  the  vault  of  the  bank,  and  is 
neither  used  to  purchase  property  or  products,  to  fulfil 
contracts,  nor  to  produce  an  income.  The  bank-note  has 
performed  all,  while  the  specie  has  performed  none  of  the 
functions  of  money.  If  the  former  should  continue  to 
circulate  any  number  of  years,  and  be  loaned  for  an  in- 
come, and  used  to  purchase  property  thousands  of  times, 
and  when  it  should  be  returned  to  New  York,  there 
should  be  no  specie  in  the  vault  of  the  bank  to  redeem 
it,  still,  every  purchase  made  by  the  bank-note  would 
be  valid,  and  every  mortgage  for  which  it  had  been  re- 
ceived would  be  a  binding  lien  upon  the  property  of  its 
drawer  for  the  payment  of  specie  both  for  the  principal 
and  the  interest.  Coins  and  bank-notes  have  a  legal 
power  to  accumulate,  not  natural  to  either  of  them.  Both 
are  generally  received  in  tender  for  debts,  so  that  one  is 
practically  as  much  money  as  the  other.  In  fact,  if  either 
is  to  be  despoiled  of  its  character  as  money,  it  must  be 
the  specie,  for  this  is  mostly  deposited  in  the  vaults  of 
banks,  and  while  so  deposited  is  not  practically  money, 
but  fche  bank-notes  which  perform  more  than  ninety-five 
hundredths  of  the  exchanges,  are  really  the  money  of 
the  country,  and  fulfil  all  its  uses  with  greater  convenience 
and  celerity  than  could  gold  and  silver.  Paper  made  to 
represent  landed  property  instead  of  specie,  and  receiving 
legal  power  to  accumulate,  measure,  and  exchange  prop- 


241 


erty,  would  answer  every  purpose  of  money,  and  would  be 
money. 

The  abundance  of  paper  is  not  an  objection  to  its  use 
as  the  material  of  money,  more  than  to  its  use  for  deeds, 
notes,  bonds  and  mortgages.  It  would  be  a  better  mate- 
rial for  money  than  gold  and  silver,  for  these  metals  are 
limited  in  amount,  and  are  troublesome,  expensive,  and 
hazardous  to  remit.  If  a  sufficient  gold  and  silver  cur- 
rency were  presented  to  this  nation  free  of  cost,  the  in- 
convenience and  expense  attending  the  circulation  and 
transmission  of  the  coins,  would  far  overbalance  the  whole 
labor  and  expense  to  provide  and  circulate  a  paper 
currency. 

The  question  to  be  settled  then,  is  this :  can  a  currency 
.be  formed  entirely  of  paper,  which  will  buy  the  produc- 
tions of  labor  as  readily  as  gold  and  silver  coins — 
not  whether  a  silver  spoon  can  be  made  of  a  paper 
dollar,  or  whether  a  gold  watch-case  can  be  made  of 
a  bank-bill  as  well  as  of  an  eagle.  Money  is  not  neces- 
sary to  make  utensils  and  ornaments.  We  want  money 
for  a  medium  of  exchange,  and  if  it  cannot  be  made  of 
paper  so  that  it  will  be  as  good  to  the  man  who  sells  his 
labor  or  his  products  as  gold  and  silver  coins,  we  must  not 
have  a  paper  currency. 

31 


CHAPTER   VIII. 

OBJECTIONS   TO   A   PAPER    CURRENCY   ON   ACCOUNT   OF 
FOREIGN   TRADE    CONSIDERED. 

WHEN  the  adoption  of  a  paper  currency  within  our  own 
limits  is  advocated,  questions  arise  concerning  the  adjust- 
ment of  our  debts  with  foreign  nations,  among  whom  gold 
and  silver  are  the  only  legal  tender.  Great  embarrass- 
ments are  apprehended  because  our  paper-money  would 
not  be  received  in  payment  of  debts  contracted  and  pay- 
able abroad 

The  exports  and  imports  of  the  United  States  are  nearly 
equai.  and  average  from  $100,000,000  to  $120,000,000 
each,  annually.  Probably  our  whole  exports  do  not 
amount  to  more  than  a  twentieth  part,  or  five  per  cent  of 
the  yearly  productions  of  our  labor.  Certainly  the  dispo- 
.  sal  of  five  per  cent  of  our  productions  is  not  a  sufficient 
reason  for  maintaining  a  metal  basis  for  our  currency, 
which  must  inevitably  affect  the  market  value,  and  disturb 
the  regular  and  just  distribution  among  ours.elves  of  ninety- 
five  per  cent  of  our  productions.  The  chief  object  of  a 
currency  is  to  effect  the  internal  exchanges  of  products 
with  facility  and  justice.  Such  an  one  could  not  impair 
foreign  trade,  nor  do  injustice  to  other  nations.  The  fol- 
lowing illustrations  will  make  it  evident  that  the  use  of  a 


243 


paper  currency  at  home,  instead  of  disturbing  foreign 
trade,  would  greatly  facilitate  it.  Trade  between  nations 
is  carried  on  by  individuals,  and  not  by  governments. 
The  governments  simply  make  the  laws,  and  fix  the  stand- 
ards by  which  the  value,  weight,  and  quantity  of  articles 
of  trade  are  to  be  decided,  as  also  the  tariffs  of  duties  on 
imports  and  exports.  Individuals  then  export  or  import 
goods  as  their  interests  dictate,  and  receive  for  them  the 
money  in  use  where  the  goods  are  sold.  For  instance,  im- 
porters of  goods  for  tKe  New  York  market,  take  in  payment 
for  their  sales  the  money  current  in  the  city.  They  do  this 
when  the  banks  pay  specie.  They  did  the  same  in  1837, 
when  the  banks  had  suspended  specie  payments.  If  they 
must  remit  the  proceeds  of  the  goods,  they  buy  cotton,  or 
other  produce  for  shipment  and  sale  abroad,  or  bills  of  ex- 
change, or  specie,  as  may  best  subserve  their  interest. 
English  exporters  to  New  York  receive  in  payment  for 
their  goods  our  current  money,  and  invest  the  money  as 
they  deem  most  profitable.  If  we  had  none  but  paper- 
money,  English  exporters  to  New  York  would  sell  their 
goods  for  our  paper-money,  buying  with  the  proceeds  our 
products,  cotton,  flour,  or  tobacco,  or  bills  of  exchange  on 
England,  or  bullion.  Or,  they  could  lend  the  money  here 
as  they  now  do,  purchase  products  for  shipment  to  Eng- 
land with  the  interest,  or  re-loan  the  interest.  If  our  pa- 
per-money would  buy  our  own  calicoes  and  broad-cloths, 
it  certainly  would  buy  English  calicoes  and  broad-cloths 
in  our  own  market.  There  is  no  reason  why  we  should 
provide  a  different  currency  to  pay  for  the  products  of 
foreign  labor,  from  that  which  pays  for  home  labor. 
If  we  import  fifteen  millions  more  than  we  export,  this 


244 


balance  will  draw  interest  against  us  until  we  can  pay 
specie  or  products.  If  State  or  United  States  stocks  be 
sent  abroad  and  sold  to  pay  the  debt,  it  is  still  a  form  of 
credit  for  which  we  must  pay  the  interest.  There  is 
certainly  no  greater  necessity  for  our  government  to 
provide  means  for  merchants  to  pay  their  debts  to  foreign 
merchants,  in  such  cases,  than  to  provide  means  for 
Southern  merchants  to  pay  their  debts  to  Eastern  mer- 
chants, in  cases  of  a  partial  failure  of  the  cotton  crop. 
When  in  any  year  Southern  merchants  buy  of  Eastern 
merchants  more  goods  than  their  crops  will  pay  for,  the 
latter  must  wait  for  the  next  crop,  meanwhile  receiving 
interest  on  the  amount  due.  If  our  government  maintains 
a  currency  which  a  balance  of  imports  over  exports  de- 
manding a  shipment  of  specie,  must  necessarily  derange, 
and  subject  debtors  to  extravagant  rates  of  interest,  this 
legal  act  must  cause  greater  loss  to  the  people  than  the 
failure  of  the  crops  which  would  turn  the  balance  of  trade 
against  them.  The  only  embarrassment  which  could  occur 
in  our  foreign  trade,  by  the  use  of  paper-money,  would  be 
delays  in  payment  when  the  exports  should  exceed  the 
imports ;  and  the  occurrence  even  of  this  would  be  ren- 
dered much  less  probable  by  the  use  of  paper-money,  at 
a  low  rate  of  interest,  than  it  is  with  our  banking  sys- 
tem, and  high  rates  of  interest.  The  greater  facilities 
afforded  to  production  would  yearly  save  an  immense 
amount  of  imports;  and  the  difference  in  the  interest 
account  between  the  United  States  and  England,  would 
save  our  people  many  millions  of  dollars  every  year. 

Except  the  small  quantity  of  gold  and  silver  mined  here, 
we  are  now  obliged  to  import  all  we  use,  both  for  our  in- 


245 


ternal  and  our  foreign  exchanges.  We  are  compelled  to 
send  our  products  abroad  and  exchange  them  for  the 
metals.  If  we  had  a  sound  paper  currency  here,  and  did 
not  depend  on  these  metals  to  make  our  internal  ex- 
changes, we  could  send  all  our  gold  and  silver  coins  out 
of  the  country  to  adjust  our  foreign  balances,  without  de- 
ranging our  monetary  affairs,  or  enabling  foreign  or  native 
capitalists  to  embarrass  the  exchanges  of  our  products 
among  ourselves.  If  we  now  have  $50,000,000  of  coins, 
we  could  ship  them,  and  cancel  this  amount  of  our  debt  to 
England,  by  paying  our  government  and  State  bonds,  and 
thus  save  $3,000,000  interest,  annually  paid  to  the  foreign 
holders  of  our  bonds,  for  the  use  of  a  representative  of  our 
own  property.  The  money,  too,  on  which  we  pay  this 
interest  goes  mostly  into  the  vaults  of  our  banks,  and  lies 
there  dead,  while  our  bank-notes  make  the  exchanges.  It 
previously  lay  idle  in  the  vault  of  the  Bank  of  England, 
while  the  notes  of  the  bank  performed  the  exchanges  in 
England. 

But  suppose,  upon  its  arrival  here,  every  dollar  of  the 
specie  should  go  into  active  circulation,  what  service 
would  it  render  us  ?  It  would  only  assist  us  to  effect  our 
internal  exchanges  ;  we  should  still  be  obliged  to  make  all 
our  products  by  our  labor,  as  much  as  if  we  had  used  our 
own  paper-money  to  make  our,  exchanges.  If  the  Bank 
of  England  should  send  $50,000,000  of  her  bank-notes  to 
the  United  States,  and  our  laws  should  make  them  a 
tender  for  debts,  they  would  be  no  more  useful  to  us  than 
$50,000,000  of  our  own  currency  ;  and  we  should  be  com- 
pelled to  pay  to  England  $3,000,000  worth  of  our  products 
yearly,  in  interest  If  we  sent  the  bonds  of  our  govern- 


246 


ment  to  procure  the  notes  of  the  Bank  of  England,  or  to 
procure  the  coins,  the  property  of  the  United  States 
would  secure  the  money  while  it  remained  here.  The 
money  would  become  a  representative  of  our  property. 
Before  it  could  again  become  a  representative  of  the  pro- 
perty of  England,  we  should  have  to  send  back  the 
$50,000,000  to  England  and  take  up  our  bonds.  As  long 
as  the  money  remained  here,  we  should  pay  to  England 
$3,000,000  yearly,  in  interest,  because  the  bonds  of 
our  government  bear  the  interest,  and  not  the  money. 
Money  is  always  a  dead  capital  in  the  hands  of  the 
holder.  Even  after  its  arrival  here,  every  person  who 
kept  it  a  day,  would  keep  it  at  the  loss  of  the  interest  for 
that  day,  because  money  has  no  power  of  growth  beyond 
that  given  by  law,  which  is  as  impotent  of  actual  produc- 
tion as  the  picture  of  a  horse  is  of  performing  the  labor  of 
the  horse.  We  might  as  well  pay  to  England  $3,000,000 
yearly  for  a  man  to  represent  us  in  Congress,  as  to  pay 
this  sum  for  a  representative  of  our  property. 

With  a  just  monetary  system,  we  should  no  more  de- 
pend upon  a  foreign  nation  for  money  to  represent  our 
own  property  in  our  own  country,  than  for  the  air  we 
breathe.  When  we  make  our  own  property  the  basis  of 
our  currency,  and  furnish  all  the  money  we  need  for  the 
exchange  of  our  own  products  among  ourselves,  no  for- 
eign nation  will  have  power  to  affect  our  money-market, 
and  derange  the  internal  exchanges  of  our  products,  more 
than  it  could  induce  a  scarcity  of  air,  and  thus  disturb  our 
breathing.  No  scarcity  or  abundance  of  money  in  foreign 
nations  would  affect  our  monetary  system.  Gold  and 
silver  coins  would  be  imported  only  to  convert  into 


247 


utensils  and  ornaments,  or  for  re-exportation — these 
metals  could  never  be  needed  for  money.  If  a  paper 
currency  in  this  nation  were  properly  instituted,  it  would 
become  known  in  England,  and  it  would  be  a  thousand 
times  more  likely  to  be  received  than  our  bank  paper. 
But  if  it  would  riot  pass  there  at  all,  many  advanta- 
ges are  to  be  anticipated  from  its  adoption.  Bills  of  ex- 
change, on  foreign  nations,  could  be  much  more  easily 
obtained  than  at  present,  because  balances,  under  this 
system,  would  probably  be  in  our  favor.  If  our  mone- 
tary system  were  such  as  always  to  supply  the  necessary 
quantity  of  money  at  a  just  and  uniform  rate  of  interest,  so 
that  production  should  never  be  impeded  by  a  scarcity  of 
money  or  high  rates  of  interest,  no  one  acquainted  with 
the  trade  and  resources  of  our  country  can  doubt  that  the 
amount  of  our  yearly  productions  would  be  increased 
several  hundred  millions  of  dollars.  The  greater  the 
amount  of  our  productions,  the  greater  the  amount  that 
we  should  have  to  export,  and  the  less  we  should  need  to 
import,  and  the  balance  of  trade  would  necessarily  be  in 
our  favor ;  and  this  balance  we  should  be  compelled  to 
take  in  gold  and  silver,  or  leave  on  interest  in  foreign  na- 
tions. The  foregoing  considerations  make  it  evident  that 
no  unfavorable  results  are  to  be  apprehended  to  our  for- 
eign trade  from  the  adoption  of  a  paper  currency  at  home. 


RECAPITULATION. 

IN  the  foregoing  chapters  the  following  propositions 
have  been  considered,  and,  it  is  believed,  fully  sustained. 

1.  That  there  is  an  essential  difference  between  intrin- 
sic value  and  the  value  of  money. 

2.  That  any  material  may  be  made  money,  by  endow- 
ing it  with  the  following  legal  powers  :  power  to  repre- 
sent, to  measure,  to  accumulate,  and  to  exchange  value. 

3.  That  money  which  does   not    represent    its    full 
amount  of  actual  value,  carries  upon  its  face  a  false  pre- 
tence ;    nothing  can   in  fact  be  money,  that  does   not 
represent  property. 

4.  That  money,  as  a  measure  of  value,  is  controlled 
by  the  rate  per  cent  interest  that  it  bears. 

5.  That  the  necessary  effects  of  the  present  rates  of 
interest,   are   to    accumulate  property  into  large  cities, 
and  in  the  hands  of  a  few  capitalists. 

6.  That  the  present  rates  of  interest  greatly  exceed 
the  increase  of  wealth  by  natural  production,  and  conse- 
quently, call  for  production  beyond  the  ability  of  produ- 
cers to  supply. 

7.  That  the  rate  per  cent  interest  determines  what 
proportion  of  products  shall  be  awarded  to  capital,  and 
what  to  labor. 


249 


8.  That  in  proportion  as  the  rate  per  cent  on  money 
is  increased,  the  value  of  property  and  labor  is  decreased. 

9.  That  a  currency  constantly  fluctuating  in  value,  by 
varying  rates  of  interest,  is  no  more  suitable  as  a  medium 
of  exchange  than  an  elastic  yard-stick  is  fit  for  a  measure 
of  cloth ;  that  justice  requires  uniformity  of  value,  and 
that  our  present  currency  is  devoid  of  this  quality. 

10.  That  our  present  banking  system  rests  upon  a  ficti- 
tious basis,  is  unsafe,  and  is  productive  of  many  and  great 
injuries  ;  that  while  it  calls  upon  producers  for  a  large  sum 
of  money  to  pay  for  the  use  of  its  bank-notes,  at  the  legal 
rate  of  interest,  it  assists  capitalists,  brokers,  &c.,  in  mo- 
nopolizing money,  and  enables  them  to   extort  large  sums 
from  merchants,  mechanics  and  others,  beyond  the  legal 
rate 

11.  That  the  currency,  to  be  of  uniform  value,  must  be 
limited  only  by  the  wants  of  business. 

12.  That  credit  is  indispensable. 

13.  That  a  paper  currency  can  be  made  as  secure,  and 
made  to  perform  all  the  functions  of  money,  as  well  as  a 
specie  currency. 


PART  II, 

THE  INSTITUTION  OF  PAPER  MONEY,  AND  ITS  CAPA 

BILITY  TO  REMEDY  THE  EVILS  OF  OUR 

PRESENT  CURRENCY. 


CHAPTER  I. 

THE   SAFETY    FUND. 

SECTION  I. 

THE    FORMATION    OF    MONEY,    AND    THE    MODE    OF    ISSUE. 

WE  now  enter  upon  the  most  important  but  the  simplest 
part  of  the  subject,  viz,  the  monetary  system,  by  which 
the  distribution  of  products  can  be  properly  regulated. 

The  Constitution  declares,  Art.  I.,  Sec.  VIIL,  5,  "  That 
the  Congress  shall  have  the  power  to  coin  money,  regulate 
the  value  thereof,  and  of  foreign  coin,  and  fix  the  standard 
of  weights  and  measures."  Sec.  X.,  1.,  "  No  State  shall 
coin  money,  emit  bills  of  credit,  make  anything  but  gold 
and  silver  a  tender  in  payment  of  debts."  It  is  clear  that 
by  the  Constitution,  Congress  has  the  right  to  coin  money, 
and  regulate  its  value ;  to  emit  bills  of  credit,  and  to  make 
anything  it  chooses  a  tender  in  payment  of  debts.  The 
government  is  as  much  bound  to  make  money  of  such  ma- 
terial, and  in  such  quantities,  and  enact  such  laws  as  will 
regulate  it,  as  to  fix  the  standards  of  weights  and  measures. 


251 


Sec.  X.,  1.,  declares  that  the  States  have  no  right  to  coin 
money,  emit  bills  of  credit,  or  make  anything  but  gold  and 
silver  coin  a  tender  in  payment  of  debts.  Bank  bills  are 
bills  of  credit,  and  very  hazardous  ones  too;  for  mill- 
ions of  them  are  issued  without  being  representatives 
of  property,  and  many  holders  have  sustained  great  losses 
by  their  failure.  According  to  the  Constitution  the  State 
governments  have  no  right  to  establish  banks,  and  impose 
this  hazard  and  loss  upon  the  people :  they  have  infringed 
the  province  of  the  general  government.  Having  them- 
selves no  constitutional  right  to  issue  bills  of  credit,  they 
can  certainly  have  jio  power  to  delegate  such  right  to 
others. 

In  the  plan  here  proposed  for  the  formation  of  a  national 
currency  by  the  general  government,  all  the  money  circu- 
lated in  the  United  States  will  be  issued  by  a  national  in- 
stitution, and  will  be  a  representative  of  actual  property, 
therefore  it  can  never  fail  to  be  a  good  and  safe  tender  in 
payment  of  debts.  It  will  be  loaned  to  individuals  in  every 
State,  county,  and  town,  at  a  uniform  rate  of  interest,  and 
therefore  will  be  of  invariable  value  throughout  the  Union. 
All  persons  who  offer  good  and  permanent  security  will  be 
at  all  times  supplied  with  money,  and  for  any  term  of  years 
during  which  they  will  regularly  pay  the  interest.  There- 
fore, no  town,  county,  or  State,  need  be  dependent  upon 
any  other  for  money,  because  each  has  real  property 
enough  to  secure  many  times  the  amount  which  it  will  re- 
quire. If  more  than  the  necessary  amount  of  money  be 
issued,  the  surplus  will  be  immediately  funded,  and  go  out 
of  use  without  injury.  It  will  be  impossible  for  foreign  na- 
tions, or  any  number  of  banks,  or  capitalists,  to  derange 


252 


the  monetary  system,  either  by  changing  the  rate  of  in- 
terest, or  by  inducing  a  scarcity  or  a  surplus  of  money. 
It  will  be  the  duty  of  the  government  to  ascertain  as  near- 
ly as  possible  what  rate  of  interest  will  secure  to  labor  and 
capital  their  respective  rights,  and  to  fix  the  interest  at 
that  rate. 

The  plan  requires  the  general  government  to  establish 
an  institution,  with  one  or  more  branches  in  each  State. 
This  institution  may  appropriately  be  called  the  NATIONAL 
SAFETY  FUND  :  first,  because  the  money  of  this  institu- 
tion will  always  be  safe ;  second,  because  it  will  secure 
property  and  labor  from  the  tyranny  now  exercised  over 
them  by  the  capricious  power  of  money. 

To  make  this  currency  a  true  representative  of  prop- 
erty, the  Safety  Fund  must  issue  its  money  only  in  ex- 
change for  mortgages  secured  by  double  the  amount  of 
productive  landed  estate.  The  money,  when  put  in  cir- 
culation, will  represent  and  be  secured  by  the  first  half  of 
productive  property,  and  the  interest  upon  the  mortgages 
will  be  secured  by  a  portion  of  the  yearly  products  or  in- 
come of  the  property.  The  Safety  Fund  will  issue  its 
money,  bearing  no  interest,  for  the  mortgages  bearing  in- 
terest. We  have  shown  that  money  to  maintain  its  value 
must  not  only  represent  property,  but  must  always  be  ca- 
pable of  being  loaned  for  an  income.  It  is  therefore  ne- 
cessary to  provide  not  only  for  the  issue,  but  also  for  the 
funding  of  the  money. 

The  first  of  the  following  obligations  will  be  the  money 
of  the  institution ;  the  second  will  be  a  note  bearing  in- 
terest for  the  funding  of  the  money : — 


253 

No.  -  MONEY.  Dated  - 

$500.  $500. 

The  United  States  will  pay  to  the  bearer  five  hundred  dol- 
lars in  a  Safety  Fund  note,  on  demand,  at  the  Safety  Fund 
Office  in  the  city  of  -- 


SAFETY  FUND  NOTE.         Dated  - 
$500.  $500. 

One  year  from  the  first  day  of  May  next,  or  at  any  time 
thereafter,  the  United  States  will  pay  tQ  A.  B.,  or  order,  in 
the  city  of  ---  five  hundred  dollars  ;  and,  until  such 
payment  is  made,  will  pay  interest  thereon  on  the  first  day  of 
May  in  each  year,  at  the  rate  of  one  per  cent  per  annum. 

The  money  will  bear  no  interest,  but  may  always  be  ex- 
changed for  the  Safety  Fund  notes,  which  will  bear  in- 
terest. Those  who  may  not  wish  to  purchase  property  or 
pay  debts  with  their  money,  can  always  loan  it  to  the  In- 
stitution for  a  Safety  Fund  note,  bearing  an  interest  of 
one  per  cent  per  annum.  Therefore  the  money  will  al- 
ways be  good  ;  for  it  will  be  the  legal  tender  for  debts  and 
property,  and  can  always  be  invested  to  produce  an 
income. 

Money  being  loaned  at  one  and  one-tentn  per  cent,  and 
Safety  Fund  notes  bearing  but  one  per  cent,  the  differ- 
ence of  ten  per  cent  in  the  interest  will  induce  owners  of 
money  to  lend  to  individuals,  and  thus  prevent  continual 
issues  and  funding  of  money  by  the  Institution. 

The  Safety  Fund  notes  are  made  payable  a  year  after 
date,  to  prevent  the  unnecessary  trouble  of  funding  money 
for  short  periods.  It  is  not  probable  that  the  Institution 


254 


will  issue  notes  for  a  less  amount  than  $500.  People 
having  small  amounts  will  seldom  wish  to  fund  them. 
They  will  loan  to  individuals,  or  purchase  property.  If, 
however,  it  be  deemed  desirable  to  fund  small  amounts, 
they  may  be  received,  and  credited  in  a  small  book,  as  in 
savings  banks,  and  the  interest  paid  upon  these  credits  as 
upon  Safety  Fund  notes. 

Having  given  an  outline  and  brief  explanation  of  the 
Safety  Fund,  or  proposed  system  of  currency,  we  will  in 
the  next  place  endeavor  to  show  that  it  will  possess  all 
the  properties,  and  be  capable  of  performing  all  the  func- 
tions of  money.  We  have  said  in  our  description  of 
money  that  it  must  be  a  representative  of  property.  The 
Safety  Fund  money  being  based  on  productive  landed 
estate  to  double  its  amount,  will  evidently  be  an  un- 
doubted representative  of  property.  Second,  money 
must  have  power  to  accumulate.  In  the  Safety  Fund 
there  will  be  ample  provision  to  secure  an  income  be- 
yond all  contingency.  Third,  it  must  have  power  to 
measure  value.  The  Safety  Fund  money  will  not 
only  possess  this  power  equally  with  coins,  but  it  will 
possess  the  additional  quality  of  being  a  uniform  and  per- 
fect measure.  By  establishing  a  uniform  rate  of  interest, 
the  dollar  will  be  of  invariable  value,  and  cannot  be  made 
to  fluctuate  more  in  the  measure  of  property  than  the 
yard-stick  in  the  measure  of  cloth.  Fourth,  it  must  have 
power  to  exchange  value.  This  power  must  depend  on 
the  disposition  of  sellers  to  receive  it  in  exchange  for  pro- 
ducts ;  and  this  disposition  depends  on  its  legal  capabili- 
ties to  pay  debts,  and  accumulate  an  income  by  interest. 
We  have  elsewhere  shown  that  any  portable  substance 


255 


possessing  these  properties  will  be  money.  The  Safety 
Fund  money  will  possess  all  the  properties  adapted  to  its 
use  as  money  that  belong  to  coins,  and  can  be  counted 
and  carried  with  greater  convenience,  and  be  more  easily 
transmitted  from  one  section  of  the  country  to  another. 
The  effect  of  its  adoption  will  be  to  annihilate  all  differ- 
ence of  exchange  between  different  commercial  points,  or 
reduce  it  to  the  merely  nominal  expense  of  letter  postage. 


SECTION  II. 

THE   SECURITY   OF   THE    SAFETY    FUND   MONEY. 

The  Safety  Fund  money  being  made  a  representative 
of  property,  its  legal  value  will  be  equal  to  the  actual  value 
of  the  property.  For,  if  the  money  can  be  loaned  for  a 
per  centage  interest  which  will  buy  a  portion  of  the  pro- 
ducts of  land  and  labor,  the  legal  value  of  the  principal 
will  be  equal  to  the  actual  value  of  so  much  land  as  will 
produce  what  the  interest  will  purchase.  So  long,  there- 
fore, as  the  mortgages  on  the  land  continue  good,  the  mo- 
ney will  be  a  representative  of  property.  When  branches 
are  established  in  all  the  States,  every  individual  can  bor- 
row money,  at  the  usual  rate  of  interest,  to  the  amount  of 
half  the  value  of  his  productive  land.  Every  dollar  thus 
borrowed  will  be  added  to  the  amount  in  circulation,  as 
much  as  if  it  had  been  imported  from  a  foreign  country 
or  coined.  The  Safety  Fund  will  actually  create  all  its 
money. 


256 


It  will  require  a  very  small  proportion  of  the  property 
of  the  country  to  secure  a  sufficient  currency.  The  prop- 
erty in  Massachusetts,  according  to  the  assessed  valuation 
in  1840,  averaged  $406  50  to  each  individual.  The  aver- 
age wealth  in  property  of  our  whole  population  is  from 
three  to  five  hundred  dollars.  The  amount  of  money 
needed  will  not,  probably,  exceed  ten  or  fifteen  dollars  for 
each  inhabitant.  Therefore,  only  three  or  four  per  cent 
of  the  property  of  the  country  will  be  necessary  to  secure 
an  ample  supply  of  money.  The  government  can  in  this 
way  provide  a  portable  legal  value  to  any  extent  that  can 
be  required.  The  people  can  borrow  money  from  the 
Safety  Fund  in  larger  or  smaller  sums  at  precisely  the  same 
rate  of  interest. 

The  mortgages  may  be  drawn  payable  one  year  after 
date,  with  one  and  one-tenth  per  cent  interest.;  and  so  long 
as  this  interest  shall  be  regularly  paid,  the  principal  may 
remain,  in  whole  or  in  part,  at  the  option  of  the  mortga- 
gor. So,  whenever  a  mortgagor  shall  have  the  means,  he 
can  pay  off  any  part  of  the  mortgage,  and  stop  the  inter- 
est. But  he  will  never  be  compelled  to  pay  the  principal 
so  long  as  the  interest  shall  be  regularly  paid. 

No  aid  from  large  capitalists  will  be  required  to  estab- 
lish the  Safety  Fund,  for  the  money  will  be  made  a  balance 
against  the  landed  estate  of  the  people,  without  a  specie 
basis.  It  is  no  more  necessary  to  make  money  of  gold 
and  silver  to  render  it  a  just  balance  against  property,  than 
to  make  a  mortgage  of  gold  or  silver  to  render  it  of  equal 
value  with  a  piece  of  land.  The  value  of  the  mortgage 
depends  upon  its  legal  power  over  the  land  and  its  pro- 
ducts. The  Safetv  Fund  money  will  have  a  legal  repre- 


257 

sentative  value  which  will  be  capable  of  purchasing  the 
mortgage,  or  the  land,  or  the  products  of  the  land.  The 
mortgage,  or  the  money  as  such,  can  be<  no  more  valuable 
made  of  gold  than  of  paper.  As  paper  mortgages  amply 
secure  individual  loans  of  money,  so  paper  mortgages  will 
secure  the  issues  of  money  by  the  Safety  Fund.  If  peo- 
ple will  readily  loan  gold  and  silver  coins  for  paper  mort- 
gages on  property,  they  must  esteem  the  paper  mortgages 
as  valuable  as  the  coins. 

A  mortgage  is  a  lien  upon  a  specific  piece  of  property. 
The  Safety  Fund  money  will  be  a  general  lien  upon  all 
property  for  sale,  and  a  legal  tender  in  payment  for  all 
debts.  The  mortgages  given  to  the  Safety  Fund  will  be 
individual  obligations  for  the  payment  of  money,  and  will 
be  necessarily  local.  But  the  money  issued  for  them  will 
be  neither  individual  nor  local.  It  will  be  equally  good  in 
Maine,  New  York,  Ohio,  and  Florida.  If  its  owner  does 
not  wish  to  lend  it  to  individuals,  he  can  loan  it  to  any 
branch  of  the  Safety  Fund  at  an  interest  of  one  per  cent. 

It  has  already  been  stated  that  it  is  no  more  necessary 
to  make  money  of  gold  and  silver  in  order  to  make  jt  good, 
than  to  make  a  bond  or  note  on  a  silver  or  gold  plate  in 
order  to  make  it  good.  Still,  if  the  people  shall  insist  upon 
a  mixture  of  specie  in  the  currency,  it  can  be  easily  pro- 
vided. It  will  only  be  necessary  that  the  interest  to  be 
received  and  paid  by  the  Safety  Fund  shall  be  paid  in  spe- 
cie. By  loaning  money  at  one  and  one-tenth  per  cent, 
the  Fund  will  always  be  in  receipt  of  many  times  the  in- 
terest in  specie  that  it  can  be  called  upon  to  pay.  This 
will  preserve  the  use  of  coins  as  money.  It  appears  evi- 
dent, however,  that  the  issues  of  the  Safety  Fund  will  ful- 

33 


258 


fill  all  the  functions  of  money  without  any  admixture  of 
coins. 

The  Safety  Fund  money  will  probably  be  compared  by 
some  to  the  assignats  of  France,  or  to  the  Continental 
money  issued  by  the  United  States  during  the  Revolution. 
But  they  are  no  more  alike  than  a  good  productive  soil  and 
a  desert.  There  is  as  much  difference  between  the  paper 
assignats  issued  by  France  and  the  paper  money  to  be  is- 
sued by  the  Safety  Fund,  as  between  two  perpetual  mort- 
gages, one  bearing  interest,  and  the  other  bearing  no  in- 
terest ;  the  first  would  be  good,  the  second  worthless.  If, 
as  heretofore  stated,  the  French  government  had  secured 
the  payment  of  the  assignats  issued  to  her  citizens  by  mort- 
gages on  productive  landed  estate,  not  exceeding  half  its 
value,  and  when  payment  was  demanded  had  funded  them 
with  government  bonds  bearing  a  yearly  interest,  they 
must  have  continued  good.  Both  the  mortgages  and  the 
assignats  would  have  been  representatives  of  property, 
and  the  yearly  productions  of  the  land  would  have  se- 
cured the  annual  interest,  and  made  them  safe.  The 
assignats  became  worthless  because  they  were  not  rep- 
resentatives of  property.  If  the  government  of  the  Uni- 
ted States,  instead  of  issuing  the  Continental  money,  had 
established  a  Safety  Fund,  and  loaned  money  for  mort- 
gages on  productive  land  worth  double  the  amount  of  the 
loan,  and  had  provided  notes  bearing  interest  to  fund  the 
money,  such  paper  money  would  have  been  a  representa- 
tive of  property,  and  invariably  good.  The  Continental 
money  not  being  a  representative  of  property,  of  course 
proved  worthless.  Had  our  government  instituted  a  Safe- 
ty Fund,  it  would  have  had  an  abundance  of  money  for 


259 

the  transaction  of  all  business ;  we  should  have  saved  the 
many  millions  we  paid  to  France  for  a  representative  of 
our  own  property,  and  besides,  should  have  prevented  the 
great  injury  suffered  by  the  country  from  the  scarcity  of 
money  and  high  rates  of  interest,  which  then  so  much  re- 
tarded business  and  production. 

The  objection  may  arise  that  if  the  first  issue  of  the 
money  of  the  Safety  Fund  be  confined  to  the  owners  of 
land,  it  will  place  in  their  hands  a  great  monopolizing 
power,  and  instead  of  diffusing  wealth  in  accordance  with 
the  labor  performed,  will  give  it  to  landholders.  Of  course 
no  person  can  or  ought  to  obtain  a  representative  of  prop- 
erty, if  he  have  none  to  be  represented.  The  money 
of  the  Safety  Fund  ought  not  to  be  issued  "on  perish- 
able property,  because  the  property  might  be  destroy- 
ed, when  the  money  would  cease  to  be  a  representative, 
and  become  worthless.  If  a  man  without  property  should 
borrow  from  the  Fund,  the  money  would  represent  his 
credit,  and  not  his  property ;  and  consequently,  if  he 
should  not  acquire  means  to  pay  it,  the  money  being  guar- 
anteed by  the  government,  the  loss  would  fall  upon  the 
nation.  The  following  illustration  will  make  it  evident 
that  an  abundant  supply  of  money,  and  the  reduction  of 
the  rate  of  interest,  will  benefit  to  as  great  an  extent  those 
who  are  without  property,  and  depend  on  their  daily  labor 
for  their  support,  as  the  land  owners. 

The  owners  of  land  will  obtain  loans  from  the  Fund, 
either  to  purchase  property  or  to  pay  labor  or  debts.  The 
money  in  circulation  will  be  increased  precisely  the  amount 
issued.  Every  farmer  owing  money  on  mortgage  of  his 
farm,  and  paying  seven  per  cent  interest,  will  probably 


260 


borrow  money  from  the  Safety  Fund  and  pay  the  debt 
The  difference  between  seven  and  one  and  one-tenth  per 
cent  on  his  mortgage  will  be  in  favor  of  the  earnings  of 
his  own,  or  others'  labor  on  his  farm.  The  receiver  of 
the  payment  for  the  mortgage  will  be  obliged  either  to 
purchase  property  with  his  money,  or  to  lend  it  to  indi- 
viduals at  one  and  one-tenth  per  cent,  or  to  the  Safety 
Fund  at  one  per  cent  interest.  He  cannot  obtain  a  higher 
rate  than  that  charged  by  the  Fund.  If  he  can  lease  to 
others  land  for  a  term  of  years  so  as  to  secure  one  and 
one-tenth,  or  one  and  one-quarter  per  cent  interest,  of 
course  he  will  purchase  the  land  in  preference  to  funding 
the  money ;  and  laborers  who  can  have  the  use  of  land  at 
these  low  rents,  will  soon  lay  up  means  to  buy  farms  for 
themselves. 


SECTION  III. 

THE  RATE  OF  INTEREST  ON  THE  SAFETY  FUND  MONEY. 

The  law  granting  to  all  the  privilege  to  lend  money  at 
the  same  rate,  has  an  apparent  fairness  which  is  deceptive. 
The  fairness  depends  upon  the  justice  of  the  rate  of  in- 
terest, and  not  upon  the  universality  of  the  grant. 

The  illustration  of  the  one  hundred  families  clearly  shows 
the  accumulative  power  of  money  at  six  per  cent  interest, 
(see  Chap.  III.,  Sec.  II.)  The  same  chapter  shows  this 
power  at  various  rates,  from  seven  down  to  one  per  cent. 
The  Safety  Fund  will  maintain  any  rate  of  interest  which 


261 


shall  be  deemed  for  the  public  good.  If  it  lend  money 
at  six  per  cent,  and  fund  at  the  same  rate,  there  will  be 
an  abundant  supply  at  a  uniform  interest  in  all  parts  of 
the  country ;  this  currency  will  therefore  be  greatly  supe- 
rior to  any  that  has  ever  been  in  use.  If  $300,000,000 
be  required,  and  the  interest  be  at  six  per  cent,  the  gov- 
ernment will  gain  a  revenue  of  $18,000,000  annually,  less 
the  expenses  of  the  Institution.  If  the  branches  be  made 
offices  of  discount  and  deposit,  and  the  deposits  be  re- 
loaned,  the  gains  will  probably  be  doubled,  and  amount  to 
say  $36,000,000.  There  is  hardly  a  doubt  that  this  latter 
or  a  larger  sum  is  annually  paid  by  producers  to  the  banks 
for  the  use  of  bank-notes.  It  will  certainly  be  more  just 
for  the  government  to  gain  this  for  the  general  benefit, 
than  to  have  the  banks  gain  it  for  their  private  purposes. 

But  a  rate  of  interest  that  will  rapidly  concentrate 
wealth  into  the  hands  of  the  government  or  individuals, 
cannot  be  just.  The  government  cannot  institute  money 
and  loan  it  at  six  per  cent  without  giving  power  to  indi- 
viduals to  loan  at  the  same  rate,  and  the  loans  of  the  latter 
will  be  much  greater  in  amount  than  those  of  the  Fund, 
even  if  its  branches  should  be  made  offices  of  discount 
and  deposit.  Besides,  as  has  been  already  shown,  money 
is  a  standard,  and  the  rate  of  interest  governs  the  per 
centage  rent  on  all  property.  No  way  can  be  devised  of 
establishing  a  high  rate  of  interest,  and  doing  justice  to 
producers.  The  evidence  adduced  in  this  volume  upon 
the  different  rates  of  interest,  appears  sufficient  to  prove 
that  one  and  one-tenth  per  cent  is  as  high  a  rate  of  in- 
terest as  money  can  bear,  and  secure  the  rights  of  pro- 
ducers. Money  at  this  rate  will  have  power  to  buy  prop- 


262 


erty;  for  in  England  it  has  often  been  loaned  even  at 
lower  rates,  after  business  had  been  paralyzed  by  main- 
taining interest  at  exorbitantly  high  rates. 

There  is  as  great  a  difference  in  their  effects  between  a 
well  regulated  currency  with  a  low  rate  of  interest  that 
will  justly  distribute  productions,  and  a  currency  with 
high  and  fluctuating  rates,  as  between  the  fire  limited  to 
the  domestic  hearth,  subserving  the  wants  of  the  house- 
hold, and  the  same  element  exceeding  its  useful  limits,  and 
destroying  the  house.  Steam  kept  within  proper  bounds 
is  usefully  employed  in  facilitating  production,  but  in- 
creased beyond  these,  it  becomes  a  powerful  agent  in  de- 
stroying life  and  property.  Money  with  the  interest  kept 
within  proper  limits,  will  distribute  products  rightfully  to 
producers ;  but  increased  interest  will  deprive  them  of  their 
rights,  and  entail  upon  them  poverty  and  misery. 


SECTION  IV. 

ORGANIZATION  AND  MANAGEMENT  OF  THE  SAFETY  FUND. 

The  institution  may  consist  of  a  principal  with  branches. 
The  first  may  be  located  at  Washington,  or  some  other 
central  town,  and  the  latter  wherever  convenience  may  re- 
quire. The  principal  of  the  institution  should  issue  money 
only  to  the  branches ;  and  they  should  be  required  to  make 
weekly  reports  to  the  principal  of  their  loans,  and  also  of 
money  returned  to  be  funded.  The  principal,  at  certain 
times,  should  report  the  money  in  circulation. 


263 


For  the  management  of  the  principal,  one  director  may 
be  appointed  by  each  State,  and  one  or  more  by  the  gen- 
eral government. 

The  States  may  elect  the  directors  of  the  branches  by 
Congressional  districts,  or  otherwise. 

The  directors  should  receive  salaries  for  their  services, 
and  not  be  allowed  to  borrow  money,  or  be  interested  in 
any  loans  ma^de  by  the  institution.  The}r  may  hold  their 
offices  during  good  behavior,  or  until  a  certain  age.  All 
officers  and  clerks  may  be  required  to  give  bonds,  with  such 
securities  as  may  be  deemed  necessary  to  secure  fidelity 
and  safety. 

All  money  loaned  may  be  paid,  in  whole  or  in  part,  at 
the  option  of  the  borrower  after  one  year,  but  the  interest 
should  be  punctually  paid. 

In  case  of  failure  for  a  certain  time  to  pay  the  interest, 
the  directors  might  advertise  the  property  covered  by  the 
mortgage,  and  sell  it  at  auction,  giving  the  debtor  timely 
notice  of  such  advertisement  and  sale. 

Sixteen  different  denominations  of  money  will  form  an 
ample  currency  :  viz,  a  piece  of  Two  and  a  Half  Cents ; 
Five  Cents ;  Ten  Cents ;  Twenty-Five  Cents  :  Fifty  Cents ; 
One  Dollar ;  Two  Dollars ;  Three  Dollars ;  Five  Dollars  ; 
Ten  Dollars ;  Twenty-Five  Dollars ;  Fifty  Dollars ;  One 
Hundred  Dollars ;  Five  Hundred  Dollars ;  One  Thousand 
Dollars ;  Five  Thousand  Dollars. 

When  interest  is  reduced  it  will  scarcely  be  necessary 
to  have  any  denomination  less  than  two  and  a  half  cents. 
If  it  be  desirable,  our  present  copper  cents  may  be  retained, 
but  probably  they  would  soon  go  out  of  use. 

Our  present  bank  notes  are  frequently  altered  from  one 


264 


Denomination  to  another ;  as,  for  instance,  by  extracting 
"  Two "  and  inserting  "  Ten."  Against  this  fraud  the 
money  of  the  Safety  Fund  may  be  effectually  guarded, 
by  making  the  size  of  the  paper  conform  to  the  denomi- 
nations. The  value  of  each  piece  will  then  be  known  at 
a  glance  by  its  size,  as  well  as  by  the  engraving.  The 
two  and  a  half  cents  pieces  may  be  made  an  inch  and  a 
half  long  and  an  inch  wide ;  and  the  size  may  be  increased 
for  each  successive  higher  denomination  by  adding  a  quar- 
ter of  an  inch  to  the  width  and  a  half  to  the  length.  The 
different  denominations  may  also  be  of  different  plates  as 
well  as  different  sizes. 

The  people  throughout  the  country  will  soon  become 
familiar  with  the  money,  and  there  will  be  little  danger 
of  deception  by  counterfeits. 

The  paper  for  the  money  and  notes  may  be  manufac- 
tured by  the  principal  Safety  Fund,  and  farther  guarded 
from  counterfeit  by  water-marks,  and  by  the  kind  and 
quality  of  the  paper,  which  should  be  of  the  best  material 
for  durability. 

In  preparing  the  money  for  issue,  no  necessity  will  ex- 
ist for  the  signatures  of  the  president  and  cashier,  more 
than  for  such  signatures  on  coins.  Proper  care  in  the  ma- 
terial and  making  of  the  paper,  in  the  engraving  of  the 
plates,  &c.,  will  more  effectually  guard  the  money  against 
counterfeit,  than  the  quality  and  coinage  of  the  precious 
metals  can  protect  coins. 

A  simple  and  short  form  of  a  mortgage  may  be  pro- 
vided, so  drawn  as  to  save  the  necessity  of  a  bond,  and 
prevent  a  multiplicity  of  papers.  With  ordinary  care  in 
the  institution  and  direction  of  the  Safety  Fund,  there  will 


265 


be  incomparably  less  danger  of  frauds  than  now  exists 
in  banks. 

The  money  for  the  amounts  under  a  dollar  will  prob- 
ably be  called  by  the  opposers  of  the  Safety  Fund,  shin- 
plasters,  rag-money,  a  very  unsafe  currency  for  laborers, 
&c.,  but  every  one  of  these  small  notes  will  be  a  repre- 
sentative of  its  nominal  amount  of  property.  They  will 
maintain  their  relative  value  to  every  other  piece  of  money 
in  every  section  of  the  country. 


SECTION  V. 
THE  PROBABLE  AMOUNT  OF  SAFETY  FUND  ISSUES. 

The  quantity  of  money  used  in  business  is  very  small 
compared  with  the  amount  of  business  transacted,  for  it  is 
only  the  average  balance  kept  on  hand.  If  a  man  receive 
$10,000,  keep  it  one  hour,  and  then  pay  it  out,  he  uses 
the  money  only  one  hour.  A  man  may  be  worth  half  a 
million  of  dollars  and  transact  a  business  of  a  million  a 
year,  and  yet  his  average  balance  not  exceed  five  thousand 
dollars.  If  he  deposit  his  money  in  bank,  the  bank  makes 
an  estimate  of  his  balance  and  lends  it  to  others ;  so  that 
even  this  balance  is  constantly  in  use. 

The  amount  of  money  used,  compared  with  the  con- 
tracts fulfilled  by  it,  is  not  much  greater  than  the  number 
of  bushels  used  compared  with  the  bushels  of  grain  meas- 
ured by  them.  The  amount  which  can  be  kept  in  active 
circulation  is  comparatively  small.  If  the  Safety  Fund  be  es- 


266 


tablished,  and  loan  at  an  interest  of  one  and  one-tenth  per 
cent  on  all  good  security,  money  will  circulate  rapidly; 
and  if  all  other  money  be  swept  from  the  country,  it  is 
doubtful  whether  the  Safety  Fund  can  keep  out  a  sum  ex- 
ceeding from  twelve  to  fifteen  dollars  for  each  inhabitant. 
Estimate  the  population  of  the  United  States  at  twenty 
millions,  and  $15  to  each  inhabitant  will  amount  to 
$300,000,000.  Allow  this  sum  to  change  hands  three 
times  a  week,  and  it  will  cancel  $900,000,000  of  debts 
each  week,  and  in  one  year  $46,800,000,000.  The  as- 
sessed value  of  all  real  and  personal  property  in  the 
United  States  does  not  vary  much  from  $6,000,000,000. 
The  $300,000,000  passing  three  times  a  week,  will  in  one 
year  pay  for  more  than  seven  tunes  the  assessed  value  of 
the  whole  property  of  the  nation.  It  is  not  intended  that 
the  Safety  Fund  and  its  branches  shall  be  made  offices  of 
discount  and  deposit.  If  they  should  be  made  such,  they 
would  more  than  double  the  amount  of  their  loans ;  but 
the  increase  of  loans  would  not  augment  the  amount  of 
money.  They  would  reloan  the  money  left  on  deposit, 
and  thus  increase  their  income,  as  banks  now  reloan  their 
deposits  and  gain  the  interest. 


267 


CHAPTER   II. 

THE    ADVANTAGES    OF    THE    SAFETY    FUND     MONEY    OVER 

SPECIE. 

THE  following  illustrations  will  show  the  different  effects 
of  a  specie  and  a  paper  currency  upon  the  prosperity  of 
countries  having  materials  for  the  formation  of  either. 
Suppose  two  fertile  islands,  each  containing  a  silver  mine  as 
productive  as  the  average  of  those  now  worked.  Two  par- 
ties, of  a  hundred  thousand  settlers  each,  emigrate  to  these 
'islands,  taking  with  them  implements  of  husbandry,  a  stock 
of  cattle,  merchandise,  tools,  &c.,  and  provisions  for  a 
year,  in  procuring  which,  they  nearly  exhaust  their  money. 
Arrived  at  their  respective  destinations,  they  locate  their 
lands,  &c.,  and  each  party  begins  to  make  exchanges 
among  its  members.  The  want  of  money  is  soon  severely 
felt.  The  inhabitants  of  one  island  determine  to  have  a 
metal  currency,  and  accordingly  prepare  to  work  their  sil- 
ver mine.  One-fifth  of  the  whole  population,  L  e.,  twenty 
thousand,  are  men  capable  of  labor.  Three  thousand  en- 
gage in  working  the  mine,  and  with  their  families  consti- 
tute a  population  of  fifteen  thousand,  who  consume  the 
products  of  others.  Suppose  each  man  to  earn  or  make 
half  a  dollar  a  day ;  total  in  a  year  four  hundred  and  fifty 
thousand  dollars.  This  sum  being  exchanged  by  the  mi- 
ners for  food,  clothing,  &c.,  goes  into  immediate  circula- 
tion. It  will  require  nearly  three  years  to  supply  the 


268 


money  necessary  for  their  internal  exchanges,  say  $12  for 
each  inhabitant,  i.  e.,  $1,200,000;  and  during  this  period 
money  must  be  very  scarce.  The  shipment  of  any  specie 
abroad  to  pay  for  goods,**  will  increase  the  want  of  money 
at  home.  Suppose  the  population  to  increase  three  per 
cent,  that  is,  three  thousand  a  year,  they  must  continue 
to  mine  $36,000  yearly,  to  maintain  the  proportion  of  $12 
to  each  individual. 

The  inhabitants  of  the  other  island  determine  not  to 
work  their  silver  mine,  but  to  establish  a  Safety  Fund, 
and  lend  the  paper  money  as  heretofore  stated.  All  have 
the  opportunity  to  borrow  to  one-half  the  value  of  their 
productive  land.  This  money  costs  nothing  but  the  com- 
paratively trifling  labor  of  the  paper  and  engraving.  If  a 
surplus  be  in  circulation,  its  owner  can  at  any  time  pay 
off  a  mortgage  to  the  Fund  and  stop  the  interest,  or  fund 
the  money  and  receive  interest.  The  exact  amount  re- 
quired will  always  be  in  circulation,  and  interest  being 
regular,  the  value  of  the  money  will  be  invariable. 

The  difference  between  the  labor  to  mine  and  coin  the 
silver  money,  and  the  labor  to  make  and  engrave  the  paper 
money,  will  be  a  clear  saving  to  the  island  using  the  paper 
money ;  and  all  this  difference  of  labor  can  be  applied  to 
the  production  of  articles  for  export.  The  island  using 
the  paper  money  can  export  about  as  great  an  amount  of 
products  as  the  other  island  will  coin  in  money.  If  the 
latter  island  require  the  products  of  the  former,  and  ex- 
change coins  for  them,  the  former  island  will  use  the  silver 
money  for  manufactures,  or  for  export ;  it  cannot  need 
them  for  money.  If  the  Fund  lend  at  one  and  one-tenth 
per  cent  interest,  the  island  will  always  have  an  abundance 


269 


of  money  at  a  low  and  uniform  rate,  so  that  every  branch 
of  industry  can  be  carried  on  to  the  best  advantage,  and 
the  property  will  be  distributed  to  those  whose  labor  shall 
earn  it.  But  the  business  and  productive  industry  of  the 
island  using  coins  will  be  constantly  retarded  for  want  of 
money,  and  the  high  and  fluctuating  rates  of  interest  will 
inevitably  concentrate  the  wealth  in  the  hands  of  a  few 
capitalists,  and  leave  the  producers  in  poverty.  The  peo- 
ple of  the  island  using  the  paper  currency  will  be  rich, 
virtuous,  and  happy,  while  those  using  the  silver  money 
will  be  poor,  wicked,  and  miserable,  because  poverty  and 
avarice  will  lead  to  crime.  If  the  two  islands,  instead  of 
trading  with  each  other,  maintain  trade  with  other  nations, 
it  must  be  obvious  that  the  one  using  the  paper  money  0 
will  have  great  advantage  over  the  one  using  the  silver 
money. 

Suppose  the  same  number  of  emigrants  to  settle  on  a  . 
third  island,  and  borrow  their  whole  currency  of  a  foreign 
nation,  say  $1,000,000  in  gold,  silver,  or  paper  money,  at 
an,  interest  of  eight  per  cent  per  annum,  payable  half 
yearly. .  If  their  imports  equal  their  exports,  and  they  be 
obliged  to  issue  bonds  every  six  months  at  eight  per  cent 
to  pay  the  interest,  in  fifty-three  years  the  island  will  be- 
come indebted  to  foreign  nations  $64,000,000;  $63,000,000 
of  which  will  be  interest  on  the  $1,000,000  originally  bor- 
rowed. The  people  must  lose  this  amount  in  consequence 
of  defective  legislation.  If  the  emigrants  through  their 
government  establish  a  Safety  Fund,  and  provide  their 
own  currency,  instead  of  importing  it,  they  will  save  the 
whole  interest,  beside  having  great  advantages  by  the 
abundance  of  money. 


270 


Paper  money  can  be  as  easily  made  to  exceed  coins  in 
value,  as  coins  to  exceed  paper  money,  because  the  value 
of  all  money  is  governed  by  the  per  centage  interest.  Let 
the  Safety  Fund  loan  paper  money,  and  fund  it  with  Safety 
Fund  notes  bearing  six  per  cent ;  let  it  loan  coins,  and 
fund  them  with  Safety  Fund  notes  bearing  but  four  per 
cent," and  the  paper  money  will  always  be  the  more  valu- 
able, and  command  a  premium  in  exchange  for  coins. 
The  paper  money  will  as  certainly  command  a  premium 
above  coins,  as  a  ground-rent  at  six  per  cent  will  com- 
mand more  than  one  at  four  per  cent.  If  this  nation  had 
a  sufficient  quantity  of  specie  for  a  currency,  it  would  still 
be  necessary  to  have  an  institution  similar  to  the  Safety 
Fund ;  for  interest  can  only  be  kept  regular  by  the  estab- 
lishment of  an  institution  to  make  loans  at  a  uniform  rate 
of  interest  whenever  good  security  is  offered,  and  to  fund 
the  specie  whenever  it  is  redundant. 

A  government  may  obtain  an  immense  power  over  the 
property  of  the  people  by  furnishing  a  paper  currency  at 
six  per  cent  interest.  Suppose  our  government  to  estab- 
lish a  Safety  Fund,  and  make  its  paper  money  the  only 
tender  in  payment  for  debts.  Let  the  Safety  Fund  lend 
an  amount  equal  to  say  $15  to  each  inhabitant  for  a  pop- 
ulation of  20,000,000,  that  is,  $300,000,000,  money  would 
become  plenty.  This  sum  loaned  on  double  its  amount 
of  landed  estate,  would  cover  $600,000,000  worth  of  prop- 
erty. If  the  government  should  leave  the  principal  out- 
standing during  the  regular  payment  of  the  interest,  it 
wbuld  receive  from  the  interest,  after  deducting  say 
$1,000,000  for  the  expenses  of  the  Safety  Fund,  an  annual 
revenue  of  $17,000,000.  After  a  year  or  two  let  the 


271 


Fund  refuse  to  make  further  loans,  and  yearly  collect  its 
nett  gain  of  $17,000,000  for  ten  years,  i.  e.,  $170,000,000, 
and  the  whole  business  of  the  nation  must  be  transacted 
r  with  the  remaining  $130,000,000.  This  would  subject  the 
property  mortgaged  to  a  great  sacrifice,  and  equally  de- 
press the  price  of  other  lands  and  products.  In  six  years 
more,  the  government  would  collect  in  $102,000,000 
additional  interest,  thereby  reducing  the  currency  to 
$28,000,000.  The  interest  for  two  years  more  would 
amount  to  $34,000,000,  but  only  $28,000,000  could  be 
paid,  because  the  whole  amount  of  money  would  be  ex- 
hausted. By  foreclosing  its  mortgages,  the  government 
could  buy  the  $600,000,000  worth  of  property  for  the 
$6,000,000  which  would  still  be  due.  Hence  it  is  evident 
that  the  law  has  power  to  make  paper  money  to  control 
property  as  effectually  as  gold  and  silver. 


272 


CHAPTER   III. 

SUNDRY  OBJECTIONS  TO  THE    SAFETY    FUND ITS   EFFECTS 

ON  OUR  BANKING  INSTITUTIONS,  ETC.,  CONSIDERED. 

IT  may  be  well  to  examine  a  few  more  of  the  prominent 
objections  which  will  be  urged  against  the  adoption  of  the 
Safety  Fund.  Our  banking  institutions  will  probably  com- 
plain that  its  establishment  will  infringe  the  chartered 
rights  granted  to  them  by  the  States.  But  in  instituting 
the  Safety  Fund,  the  general  government  will  not  with- 
draw their  charters,  nor  pass  any  law  preventing  them 
from  banking.  Doubtless  it  has  the  right  to  prohibit  the 
issue  of  such  bills  of  credit  as  bank-notes ;  but  this  will 
not  be  necessary.  The  government  will  simply  provide  a 
means  whereby  the  people  in  every  section  of  the  coun- 
try can  obtain  a  fair  representative  of  their  productive 
landed  estate,  at  one  and  one-tenth  per  cent  interest,  in- 
stead of  being  compelled  to  procure  from  banks  and  indi- 
viduals an  imperfect  and  unsafe  representative  of  their 
property,  and  at  six,  seven,  or  eight  per  cent  interest ;  as 
much  for  the  use  of  a  representative  as  the  crops  of  their 
land  are  worth. 

It  is  a  frequent  remark  that  legal  enactments  have  no 
more  effect  upon  the  value  of  money  than  upon  the  price 
of  wheat,  and  that  competition  in  lending  money  will 
equitably  regulate  the  rate  of  interest.  By  establishing 
the  Safety  Fund  to  lend  money  at  one  and  one-tenth  per 


I 


273 


cent  to  all  who  offer  the  required  security,  and  not  inter- 
fering with  the  chartered  privileges  of  the  banks,  we  shall 
ascertain  whether  legal  enactments  have  any  power,  and 
the  advocates  of  regulating  the  rate  of  interest  by  compe- 
tition among  the  lenders  of  money,  will  also  have  an  op- 
portunity to  test  the  correctness  of  their  opinions. 

Banks  will  object  that  they  do  business  on  a  specie  basis, 
and  the  Safety  Fund  on  a  land  basis.  It  may  be  difficult 
to  show  that  the  former  is  better  than  the  latter;  for  all 
kinds  of  money  must  be  as  useless  without  land  and  pro- 
ducts to  be  exchanged,  as  yard-sticks  with  nothing  to 
measure.  It  will  be  fair  toward  farmers,  mechanics,  and 
merchants,  for  the  government  to  institute  a  paper  cur- 
rency, and  equally  fair  toward  the  banks ;  for  their  bank- 
notes are  no  more  legally  payable  in  specie  than  the  en- 
dorsed and  other  notes,  and  even  the  book  accounts  of 
private  citizens.  If  the  Safety  Fund  money  will  be  a  safe 
medium  of  exchange  for  products,  it  will  be  a  just  equiva- 
lent to  pay  debts  to  banks,  because  the  stockholders  can 
buy  products  or  land  with  it ;  therefore  the  issue  of  a  ten- 
der based  on  landed  estate  cannot  do  injustice  to  our 
banking  institutions. 

The  Safety  Fund  money  being  made  the  legal  tender, 
the 'banks  cannot  refuse  to  receive  it  in  payment  of  debts. 
They  can  easily  and  safely  collect  in  their  dues,  withdraw 
their  circulation,  and  wind  up  their  business,  without  caus- 
ing a  scarcity  of  money,  or  any  panic  in  the  money  mar- 
ket. We  shall  then  have  nothing  circulating  as  money 
which  is  not  a  legal  tender.  If  the  banks  shall  still  deem 
their  specie  more  valuable  than  the  paper  money  of  the 
Safety  Fund,  and  in  closing  up  their  business  shall  not 

35 


274 


have  as  much  specie  to  divide  among  the  stockholders  as 
they  originally  paid  in,  or  if  they  shall  have  to  pay  the 
whole  capital  stock  in  Safety  Fund  money,  still  no  injustice 
will  be  done  to  them,  for  the  law  making  paper  money  a  ten- 
der in  payment  of  debts,  gives  to  it  the  same  value  possess- 
ed by  gold  and  silver  regulated  at  the  same  rate  of  interest. 
While  the  establishment  of  the  Safety  Fund  can  do  no 
wrong  to  banks,  it  will  greatly  benefit  those  engaged  in 
production  and  distribution. 

Believers  in  the  great  intrinsic  value  of  gold  and  silver 
coins,  have  nothing  to  apprehend  from  the  adoption  of 
paper  money  for  a  tender  in  payment  of  debts,  and  the  re- 
duction of  interest.  The  institution  of  paper  money,  and 
the  rejection  of  coins  as  a  tender,  can  have  no  more  effect 
on  the  intrinsic  value  of  the  precious  metals,  or  upon  the 
desire  to  possess  them  on  account  of  this  value,  than  the 
enactment  of  a  law  that  wheat  shall  be  transported  only 
on  horseback  will  alter  the  nutritious  properties  of  the 
wheat,  and  the  desire  to  use  it  for  food.  One  would  sup- 
pose that  those  who  so  highly  prize  gold  and  silver  coins 
for  their  intrinsic  value,  would  be  strong  advocates  of 
paper  money;  the  coins  being  released  from  their  use  as 
money,  the  gold  and  silver  would  easily  and  naturally  fall 
into  their  hands. 

It  may  be  objected  that  if  money  be  made  so  plenty, 
the  people  will  run  into  extravagant  speculations ;  but  a 
little  thought  will  make  it  evident  that  the  system  will  pre- 
vent great  fluctuations  in  the  price  of  property,  and  of 
course  remove  the  inducements  for  speculations. 

It  may  be  objected  that  so  great  an  alteration  in  the 
medium  of  exchange  and  measure  of  value,  will  derange 


275 


and  unsettle  the  value  of  property,  introduce  confusion 
into  the  various  branches  of  business,  and  break  down  all 
existing  relations  between  money  and  property.  But  in 
substituting  a  better  for  a  worse,  the  means  to  effect  the 
change  must  be  improvements ;  and  every  stage,  from  the 
commencement  to  the  entire  exclusion  of  the  present  cur- 
rency, will  be  a  succession  of  benefits  to  the  mass  of  the 
people.  The  change  will  only  lessen  the  power  of  capi- 
tal over  the  future  productions  of  labor.  It  will  deprive 
no  man  of  the  use  of  his  property  or  money ;  both  will  be 
at  his  disposal  as  much  as  under  the  present  monetary 
system. 

Another  objection  will  be  the  risk  incurred  by  unfaith- 
fulness in  the  officers  appointed  to  manage  the  Institution. 
Every  institution  must  have  officers,  and  a  certain  amount 
of  power  must  necessarily  be  confided  to  them ;  conse- 
quently a  risk  of  unfaithfulness  must  be  incurred.  But 
other  circumstances  being  equal,  the  risk  is  greater  or  less, 
in  proportion  to  the  action  of  self-interest ;  and  according 
to  the  plan  of  the  Safety  Fund,  no  officer  will  be  allowed 
to  borrow  money,  or  be  interested  in  any  loan  made  by 
the  Fund.  Bonds  will  also  be  required  for  the  faithful  dis- 
charge of  duty.  But,  granting  there  may  be  risk,  yet  it 
will  be  almost  nothing  compared  with  that  now  incur- 
red under  the  banking  system,  where  every  officer  has 
his  own  interest  to  serve  in  various  ways,  and  especially 
by  increasing  rates  of  interest  and  using  the  funds  of  the 
bank  for  his  private  advantage. 

It  may  also  fee  objected  to  the  Safety  Fund,  that  it  will 
lessen  the  incomes  of  widows  and  orphans ;  but  there  are 
very  few  of  this  class  who  have  incomes.  Objectors  on 


276 


this  ground  will  therefore  do  well  to  extend  their  sympa- 
thy so  as  to  embrace  the  nine-tenths  whose  only  means 
of  support  is  the  scanty  compensation  for  their  daily  and 
excessive  toil,  and  whose  condition,  and  the  reward  of 
whose  labor,  as  well  as  the  earnings  of  those  who  have  in- 
comes, will  be  greatly  improved  by  the  reduction  of  in- 
terest on  capital.  Their  sympathies  will  then  lead  them 
to  advocate  the  Safety  Fund,  unless  actuated  by  some 
other  motive  than  commiseration  for  the  needy. 

The  greatest  difficulty,  however,  to  be  apprehended  in 
the  introduction  of  the  new  currency,  will  be  found  in  the 
attachment  of  the  people  to  ancient  laws  and  customs, 
sanctioned  by  the  greatest  statesmen  of  the  past,  and  ages 
of  experience ;  but  this  feeling  operates  with  the  same 
force  in  other  things,  and  has  been  found  to  yield  in  favor 
of  improvements  introduced  by  the  progress  of  discoveries 
in  the  arts  and  sciences.  There  needs  only  indubitable 
proof  that  an  evil  exists,  and  that  a  remedy  can  be  applied 
for  its  removal,  in  order  to  secure  the  reformation.  We 
have  already  shown  that  great  evils  have  arisen  from  the 
unjust  monetary  laws  of  the  past,  and  to  our  mind,  con- 
clusive proof  has  been  offered  to  sustain  this  point.  It  is 
now  incumbent  on  objectors  to  show,  for  instance,  that 
the  inhabitants  of  cities  produce  more  for  the  people 
of  the  country  than  the  latter  produce  for  the  former ;  that 
a  man  by  standing  on.  the  corner  of  a  street  a  few  hours 
in  a  day  to  loan  the  legal  representative  of  value  to  the 
necessitous  at  exorbitant  rates  of  interest,  produces  more 
of  the  necessaries  of  life  than  a  hundred  industrious  farm- 
ers and  mechanics ;  that  the  yearly  use  of  the  present 
bank-notes  in  the  State  of  New  York  is  really  worth  as 


277 


much  to  the  people  as  the  $4,435,333  worth  of  products 
which  they  are  compelled  to  sell  annually  to  pay  the  in- 
terest ;  or  that  one  and  one-tenth  per  cent  interest  would 
secure  to  producers  a  greater  proportion  of  the  products 
of  their  labor  than  they  are  entitled  to  receive.  If  they 
can  prove  that  the  productiveness  of  land  and  labor  is  in 
proportion  to  the  rate  of  interest,  or  that  the  public  good 
requires  that  property  should  be  concentrated  in  few 
hands,  they  will  then  have  shown  the  superiority  of  our 
present  monetary  system.  These  are  things  of  which 
farmers  and  mechanics  and  other  producers  can  judge  as 
well  as  any  statesman  or  lawyer  in  the  country.  If  scarcity 
of  money  and  high  rates  of  interest  do  not  affect  the  mar- 
ket value  of  labor  and  products,  let  it  be  clearly  shown  to 
the  producing  classes.  If  such  questions  be  evaded,  it  is 
but  fair  to  infer  that  the  advocates  of  existing  monetary 
laws  are  willing  or  desirous  that  the  oppression  of  pro- 
ducers should  be  continued,  and  the  people  be  kept  ignorant 
of  the  causes  of  their  poverty,  instead  of  having  the  re- 
ward of  their  labor  and  their  business  transactions  regu- 
lated by  a  standard  which  they  will  perceive  to  be  just, 
and  of  which  they  can  understand  the  operation. 

It  may  be  admitted  that  the  theory  of  the  Safety  Fund 
is  good,  but  impracticable  at  present ;  it  is  calculated  for 
some  future  generation,  when  men  shall  have  become  more 
intelligent  and  virtuous.  If  the  same  faith  shall  be  held  by 
the  generations  which  are  to  follow  us,  it  will  be  difficult 
to  point  out  at  what  period  this  desirable  reformation  will 
occur,  because  the  evil  of  our  present  system  will  always 
be  in  the  present,  and  the  good  of  the  plan  proposed  in 
the  future.  We  are,  however,  persuaded  that  a  large  ma-* 


278 


ority  of  the  people  are  aware  that  their -present  depressed 
condition  may  and  should  be  exchanged  for  something 
better,  and  the  Safety  Fund  will  be  regarded  by  them  as 
neither  too  Utopian  nor  visionary  to  be  made  immediately 
operative  for  their  benefit.  All  the  objections  to  the  pro- 
posed currency,  upon  the  ground  that  it  will  lessen  the  in- 
comes of  capitalists  who  -are  supported  by  the  labor  of 
others,  only  serve  to  show  the  true  working  of  the  Safety 
Fund  system ;  for  its  object  is  to  furnish  a  standard  of 
distribution  which  will  cause  men  to  sustain  such  mutually 
just  relations  as  to  render  it  generally  necessary  for  all  to 
render  an  equivalent  in  useful  labor  for  the  labor  received 
from  others. 


279 


CHAPTER  IV. 

ADVANTAGES   OF   THE   SAFETY   FUND. 

Safety  Fund  will  loan  money  at  a  low  rate  of  in- 
terest to  all  applicants  furnishing  the  requisite  landed  se- 
curity ;  hence  every  town,  county,  and  State,  which  has 
the  power  to  perform  the  labor,  can  make  any  internal 
improvement  without  pledging  its  property  to  large  cities 
or  to  foreign  nations  to  borrow  money.  A  few  years  since, 
the  high  and  fluctuating  rates  of  interest  so  depressed  the 
prices  of  products,  that  a  number  of  States  were  unable 
to  pay  the  half-yearly  interest  due  on  their  bonds.  Con- 
sequently, the  market  value  of  the  bonds  fell  to  a  very  low 
price,  and  many  of  the  holders  suffered  great  losses,  while 
large  capitalists  were  enabled  to  take  advantage  of  the 
fall,  and  buy  them  in  some  instances  at  less  than  one-fifth 
of  their  real  value.  The  canal  bonds  of  the  State  of  Illi- 
nois were  bought  at  from  sixteen  to  thirty  cents  on  the 
dollar.  A  short  time  after  this,  in  1845,  the  purchasers 
of  these  bonds  made  a  negotiation  with  the  State  to  fur- 
nish it  with  a  further  sum  of  money  to  complete  the  canal, 
on  condition  that  a  mortgage  should  be  given  to  them  on 
the  canal  and  adjacent  lands,  securing  the  money  so  ad- 
vanced, and  also  securing  the  par  value  and  interest  on 
the  bonds  bought  at  these  reduced  rates.  It  would  seem 
that  the  people  thought  money  would  actually  excavate 
canals,  quarry  stone,  and  build  locks.  But  when  they  had 


280 


received  the  money,  they  were  obliged  to  build  the  canal 
by  their  own  labor,  and  now  that  it  is  completed,  to  col- 
lect the  tolls  for  the  transportation  of  their  own  products, 
and  from  all  the  merchandise  passing  on  the  canal,  and 
give  this  income  to  the  foreign  and  other  holders  of  the 
bonds  for  merely  furnishing  a  representative  of  Illinois 
property. 

If  the  Safety  Fund  had  been  established,  and  money 
had  been  issued  representing  the  property  of  the  people 
of  Illinois  at  an  interest  of  six  per  cent,  their  property 
would  not  have  been  more  encumbered  than  by  being 
pledged  to  foreigners  at  the  same  rate  of  interest.  The 
property  that  secured  the  loan  to  foreigners  would  have 
been  good  security  to  the  Fund.  The  interest  on  the 
loan  would  have  been  profits  to  the  State,  instead  of  being 
profits  to  foreigners.  All  the  interest  that  Illinois  pays  to 
other  States  or  nations,  is  paid  for  the  use  of  money,  and 
not  for  the  use  of  actual  capital.  If  the  people  of  Illinois 
had  had  no  capital,  they  could  not  have  borrowed  money ; 
if  they  had  ample  capital,  they  certainly  should  have  had 
the  power  to  obtain  a  proper  representative  of  it  at  home, 
instead  of  being  compelled  to  go  abroad.  How  different 
would  have  been  the  situation  and  prosperity  of  the  State, 
had  the  Safety  Fund  been  established  before  commencing 
her  internal  improvements.  The  necessary  money  would 
have  been  obtained  at  one  and  one-tenth  per  cent  to  carry 
them  through  without  delay,  and  no  embarrassment  frown 
a  scarcity  of  money  would  have  been  felt  in  any  depart- 
ment of  industry.  The  improvements  would  have  re- 
mained in  her  own  hands,  and  she  would  long  since  have 
been  deriving  the  advantages  of  them  in  tolls  and  facilities. 


281 


But  under  the  present  monetary  system,  she  has  suffered 
the  loss  of  credit,  and  to  complete  her  improvements  has 
been  compelled  to  mortgage  her  canal  and  canal  lands, 
and  the  labor  of  coming  generations. 

Millions  of  money  are  now  paid  in  interest  to  foreign 
nations  on  our  government  and  State  debts.  Besides 
in  all  our  large  seaport  towns,  many  foreign  capitalists 
have  agencies  or,  banking  houses  for  drawing  bills  of  ex- 
change, dealing  in  stocks,  discounting  notes  at  enormous 
rates,  &c.,  and  in  this  way  immense  fortunes  are  accumu- 
lated from  our  labor.  These  capitalists  exercise  a  great 
influence  upon  our  money  market.  When  our  people  shall 
have  an  ample  national  currency,  at  a  low  and  uniform 
rate  of  interest,  these  capitalists  and  agents  will  disappear. 
Money-brokers  and  stock-jobbers,  who  now  live  by  fluc- 
tuations in  the  money  market,  will  abandon  an  occupation 
no  longer  profitable. 

The  value  of  money  being  made  uniform,  all  kinds  of 
stocks  will  maintain  a  uniform  value,  according  to  the  per 
centage  interest  which  they  will  yield,  and  the  time  they 
have  to  run  before  the  payment  of  the  principal.  If  they 
bear  a  higher  rate  of  interest  than  the  legal  one,  of  course 
they  will  be  above  par.  All  the  State  stocks  which  the 
States  have  reserved  the  right  to  pay  before  maturity,  will 
be  paid  with  money  borrowed  at  one  and  one-tenth  per 
cent.  Even  if  the  bonds  of  some  States  have  a  number  of 
years  to  run,  the  States  can  much  more  easily  pay  five, 
six,  or  seven  per  cent  interest  per  annum  upon  them  du- 
ring the  period,  than  they  can  under  the  present  monetary 
system,  because  the  value  of  their  labor  and  products  will 
be  increased.  The  same  will  be  true  of  all  private  bonds 


282 


and  mortgages  having  a  number  of  years  to  run.  A  few 
years  will  extinguish  all  these  old  loans,  and  then  there 
will  be  a  nearly  uniform  rate  of  interest  on  all  obligations 
throughout  the  nation. 

Although  all  useful  trades  and  occupations  are  mutually 
beneficial  and  necessary,  yet  in  most  nations  a  jealousy 
exists  between  the  agricultural  and  manufacturing  inter- 
ests. But  in  reality  the  natural  tendency  of  the  prosperity 
of  one  is  to  increase  the  prosperity  of  the  other.  The 
object  of  both  is  to  supply  themselves  and  each  other  with 
food,  clothing,  and  the  other  comforts  of  life.  When  they 
have  a  just  representative  of  their  products,  and  can  easily 
exchange  them  with  one  another,  the  prices  of  the  pro- 
ducts of  both  will  naturally  adjust  themselves,  so  that  both 
will  receive  the  proper  reward  of  their  labor,  while  each 
will  contribute  to  the  benefit  of  the  other.  So  long  as  the 
poverty  of  producers  is  supposed  to  be  caused  by  over 
production,  and  the  sale  of  too  many  products,  the  evil 
will  be  attributed  to  laws  favoring  one  class  of  producers 
to  the  disadvantage  of  others.  But  when  the  real  cause 
of  the  oppression,  that  is,  the  monopolizing  power  of 
money,  is  rectified,  the  various  branches  of  productive  in- 
dustry will  harmonize,  and  promote  one  another's  welfare. 

Some  may  not  understand  how  the  rate  of  interest  on 
money  affects  the  compensation  of  labor.  Suppose  the 
owner  of  a  small  farm  is  now  obliged  to  work  early  and 
late  for  a  mere  subsistence.  He  has  little  or  no  means  to 
spare  for  the  education  of  his  children,  and  in  fact  cannot 
give  them  time  to  attend  school.  If  this  man  should  be 
told  that  the  high  rate  of  interest  at  which  money  is  loaned 
deprives  him  and  his  family  of  the  comforts  of  life  and 


jm 
283 


the  means  of  education,  he  would  very  naturally  ask,  "  How 
can  that  be  ?  I  never  borrow  money  and  pay  interest, 
nor  do  I  lend  money  and  receive  interest.  The  payment 
of  a  high  rate  of  interest  by  others  does  not  affect  me ;  it 
does  not  diminish  my  crops.  I  raise  food  for  my  family, 
and  the  produce  that  I  can  spare  I  sell,  and  buy  such 
other  articles  as  we  need,  and  the  storekeeper  does  not 
charge  me  any  interest.  I  have  enough  to  do  to  live, 
without  troubling  myself  about  the  interest  on  money." 
He  is  indeed  aware  that  many  people  live  with  far  less 
labor  than  he  does,  and  have  many  more  comforts,  and 
this  he  attributes  to  their  good  fortune.  He  does  not 
grasp  the  subject  sufficiently  to  perceive  that  the  interest 
on  money  is  a  standard  or  governing  power,  which  com- 
pels him  to  contribute  his  proportion  of  the  products  re- 
quired to  support  all  the  non-producers  in  this  country, 
and  probably  some  of  the  capitalists  of  Europe.  He  does 
not  see  that  a  large  per  cent  is  taken  from  the  price  of 
his  products  by  the  purchaser,  in  order  to  enable  the  latter 
to  pay  his  interest  and  live  by  the  purchase  and  sale ;  and 
that,  for  the  same  reason,  when  he  purchases,  a  large  per 
cent  is  added  to  the  price  of  every  article  produced  by 
the  labor  of  others.  This  difference  in  price  must  be 
sufficient  to  support  all  who  live  upon  income  without 
labor. 

Let  the  Safety  Fund  be  established,  and  interest  be  re- 
duced to  one  and  one-tenth  per  cent,  and  after  a  year  or 
two  let  inquiry  be  made  of  the  same  farmer  about  his  wel- 
fare. He  would  probably  say,  "  I  am  doing  very  well ;  I 
am  much  better  off  than  I  was  two  or  three  years  ago.  I 
send  my  children  to  school,  and  have  a  good  living." 


284 


Should  he  be  told  that  his  prosperity  was  owing  to  a 
sound  currency  and  low  rate  of  interest,  he  might  say,  "  I 
do  not  borrow  any  money  from  the  Safety  Fund,  and  I 
have  no  money  to  lend  upon  interest.  I  raise  corn  and 
potatoes  as  formerly,  and  sell  them  to  the  same  merchants. 
I  do  not  see  how  the  reduction  of  the  interest  on  money 
that  other  people  borrow  is  any  benefit  to  me."  Although 
he  do  not  perceive  the  causes  of  his  past  privations  or  of 
his  present  comforts,  he  will  be  as  sensible  as  any  one  of 
the  improvements  in  his  condition.  Should  a  man  suffer 
intense  pain,  and  be  informed  that  it  was  caused  by  the 
disorder  of  a  nerve,  he  might  not  understand  this,  nor 
think  so  small  a  cause  could  occasion  such  acute  suffer- 
ing. Should  the  proper  remedy  be  applied,  the  nerve  re- 
cover its  tone,  and  the  pain  cease,  he  would  be  conscious 
of  health,  although  he  might  not  understand  how  the  pain 
was  removed.  Whether  a  man  understand  the  laws  re- 
lating to  his  physical  system  or  not,  he  will  suffer  if  any 
organ  do  not  perform  its  duty ;  and  whether  laborers  un- 
derstand the  constitution  of  money  or  not,  they  must  suffer 
all  the  consequences  of  its  imperfect  or  deranged  organ- 
ization. 

When  the  natural  reward  of  labor  is  secured  to  the 
laborer,  poverty  cannot  exist  in  any  family  whose  mem- 
bers are  able  and  willing  to  work.  And  those  who  can  so 
easily  provide  for  their  own  wants,  will  cheerfully  con- 
tribute to  the  support  of  the  sick  and  needy.  They  will 
be  able  to  supply  themselves  amply  with  the  comforts  of 
life,  and  have  an  abundance  of  time  for  intellectual  and 
moral  culture.  The  incentives  to  vice  will  be  compara- 
tively few.  Avarice  first  arises  from  the  fear  of  wantj  to 


* 


385 


remove  want  will  therefore  in  a  great  measure  remove  this 
vice,  and  the  unnumbered  evils  which  are  its  attendants. 
It  is  frequently  said  that  the  people  must  reform,  and  that 
not  until  then  may  we  hope  for  good  laws.  Not  so  :  we 
might  as  well  expect  families  to  grow  up  virtuous  where 
the  parents  are  cruel,  profligate,  and  vicious,  as  to  expect 
nations  to  be  virtuous  under  oppressive  laws.  Make  the 
laws  a  standard  of  right,  and  their  benefits  must  secure  an 
improvement  in  the  morals  of  the  people. 

It  is  often  said  that  men  are  naturally  indolent,  and  will 
not  labor  unless  compelled  by  an  urgent  necessity ;  and  it 
may  be  objected  to  the  Safety  Fund  that  if  laborers  are 
supplied  with  all  the  necessaries  and  comforts  of  life  with 
far  less  labor  than  at  present,  the  effect  will  be  to  induce 
indolence.  The  necessity  to  labor  under  the  present  sys- 
tem, capitalists  have  the  power  to  impose.  This  opinion 
is  held  mainly  by  men  who  have  accumulated  large  prop- 
erties, and  by  those  wrho  have  been  placed  in  easy  circum- 
stances by  their  ancestors.  This  class  seem  to  think  it 
their  right,  if  not  their  duty,  to  take  all  the  surplus  earn- 
ings from  laborers,  that  the  latter  may  be  kept  at  work. 
They  forget  that  their  present  means  were  accumulated 
by  exertions  prosecuted  far  beyond  any  necessity  for  sub- 
sistence or  comfort.  If  it  be  true  that  man  is  naturally 
indolent,  it  will  be  difficult  to  show  any  good  reason  for 
compelling  the  larger  part  of  the  race  to  labor  excessively 
to  avoid  starvation,  and  to  give  the  greater  and  better  por- 
tion of  their  productions  to  support  a  smaller  class  without 
labor.  There  are  those,  however,  who  believe  that  man 
is  naturally  industrious.  They  know  that  healthy  children 
are  continually  active,  and  when  motives  of  comfort  or 


286 


pleasure  are  offered,  are  ever  ready  to  make  great  exer- 
tions to  obtain  the  desired  objects.  Hence  they  believe 
that  if  the  productions  of  labor  were  fairly  awarded  to 
producers,  the  prospect  of  the  comfort  and  elevation  in 
store  for  the  industrious,  would  present  sufficient  motives 
to  secure  all  necessary  and  desirable  exertion.  This  cer- 
tainly is  true  unless  the  natures  of  the  child  and  the  man 
are  radically  different.  But  if,  when  a  child  had  made  great 
exertions  to  obtain  some  desired  object,  others  should  by 
a  secret  or  visible  power  prevent  his  receiving  three- 
fourths  of  his  well-earned  reward,  and  the  same  exertions 
should  be  repeatedly  followed  by  the  same  results,  doubt- 
less he  would  be  discouraged  from  further  attempts.  If 
under  these  circumstances  he  should  become  idle,  or  seek 
to  acquire  without  labor,  it  ought  not  to  be  attributed  to 
natural  indolence,  but  to  the  want  of  a  reasonable  assu- 
rance that  his  labor  would  be  successful.  The  situation  in 
which  the  producing  classes  of  all  nations  are  placed, 
seems  analogous  to  that  of  the  disappointed  child.  It  has 
hence  become  a  very  common  remark  that  man  is  nat- 
urally indolent.  If  equally  discouraging  circumstances 
accompanied  the  exertions  of  children  as  now  attend  the 
laboring  classes,  effort  would  depend  on  necessity ;  and 
then  men  and  children  would  be  found  to  have  the  same 
natures,  and  to  be  governed  by  similar  motives. 

As  a  further  illustration  of  the  foregoing  principle,  we 
may  notice  briefly  the  policy  which  our  government  should 
pursue  in  the  sale  of  the  public  lands.  If  a  country  is  to 
become  wealthy,  facilities  must  be  afforded  to  those  who 
perform  the  labor  necessary  to  make  it  rich.  It  is  gen- 
erally admitted  that  a  free  people  will  perform  more  labor, 


287 


and  make  greater  production  than  an  equal  number  of 
slaves.  This  seems  to  prove  that  those  who  expect  to 
own  and  enjoy  the  proceeds  of  their  labor  will  produce 
more  than  those  who  are  stinted  in  the  necessaries  of 
life  by  having  their  products  appropriated  to  the  use  of 
others.  Where  large  estates  are  rented,  and  the  land- 
lords take  a  great  share  of  the  earnings  of  their  tenants, 
the  farms  are  not  generally  as  well  cultivated,  and  the 
buildings  and  other  improvements  are  seldom  if  ever  as 
good  as  where  the  farmers  are  the  owners  of  the  soil 
which  they  cultivate.  The  difference  is  doubtless  owing 
to  the  hopelessness  in  one  case  that  even  by  severe  toil 
they  shall  materially  improve  their  condition,  and  to  the 
prospect  in  the  other  of  enjoying  the  fruits  of  their  labor. 
To  the  former  labor  is  a  burden,  while  the  latter  cheer- 
fully perform  a  greater  amount.  If  then  our  government 
desires  the  improvement  of  the  public  lands,  encourage- 
ment must  be  offered  to  those  who  will  purchase  and  cul- 
tivate them.  Speculators  who  buy  and  sell  them  at  a  ten- 
fold profit,  and  make  no  improvements  on  the  lands,  add 
nothing  to  the  wealth  of  the  country ;  but  purchasers  who 
go  upon  the  land  and  improve  it  by  their  labor,  increase 
the  public  wealth.  Let  then  the  government  sell  the  lands  to 
actual  settlers  only,  in  parcels  not  exceeding  half  a  section 
to  any  individual.  Let  a  small  part  of  the  purchase  money 
be  paid  down,  and  the  balance  remain  on  mortgage  at  one 
and  one-tenth  per  cent  interest  until  the  occupant  is  dis- 
posed to  pay  it.  In  this  way  the  land  will  at  once  bring 
an  income  to  the  government  as  good  as  if  the  whole  pur- 
chase money  were  paid  and  reloaned  at  the  legal  rate  of 
interest.  The  government  will  be  perfectly  safe,  and  the 


288 


people  will  pay  for  and  improve  the  lands.  This  will  at 
the  same  time  build  up  a  prosperous  and  happy  people, 
who  will  soon  add  immensely  to  the  wealth  of  the  nation, 
and  who,  in  improving  their  own  condition,  will  contribute 
to  the  comfort  and  happiness  of  others  by  supplying  them 
with  food,  and  receiving  their  surplus  products  in  return. 

If  laws  be  such  that  the  people  can  secure  a  good  living 
and  a  handsome  surplus  without  labor,  and  can  earn  only 
a  scanty  subsistence  and  no  surplus  by  it,  they  will  seek 
to  exempt  themselves  from  labor.  But  if  the  laws  be  made 
such  that  labor  will  secure  to  them  a  good  living  and  a 
handsome  yearly  surplus,  while  without  it  they  can  obtain 
only  a  poor  living  and  no  surplus,  people  will  incline  to 
labor.  If  interest  be  reduced  to  a  just  rate,  almost  the 
entire  population  of  the  country  will  be  engaged  in  some 
species  of  productive  industry,  and  the  laboring  classes 
will  be  relieved  from  the  support  of  a  numerous  body  who 
now  live  by  their  wits — that  is,  by  contriving  to  obtain  the 
products  of  others  without  toil.  When  money  is  made  a 
just  standard,  the  injustice  of  contracts  founded  upon  it 
will  cease,  and  many  laws  necessary  to  support  the  present 
unjust  standard  will  disappear. 

So  long  as  monetary  laws  continue  a  standard  that  will 
wrest  products  from  producers,  and  place  and  protect 
them  in  the  hands  of  non-producers,  they  will  require  for 
their  support  the  aid  of  the  sword  and  bayonet,  be- 
cause man's  natural  sense  of  right  revolts  against  the 
usurpation  and  the  injustice  of  such  protection.  But 
when  monetary  laws  shall  sustain  a  just  standard  of  value, 
which  will  award  and  protect  products  in  the  hands  of 
their  producers,  they  will  of  course  conform  to  the  nat- 


289 


ural  laws  of  production,  which  were  ordained  by  a  higher 
than  human  power.  The  distribution  then  being  accord- 
ing to  justice,  strife  will  cease,  because  a  man  having  his 
own  rights  respected  and  protected,  will  naturally  respect 
and  protect  the  rights  of  others.  The  time  is  not  far  dis- 
tant when  this  truth  will  be  known  and  appreciated  by  all 
civilized  nations,  and  the  mistaken  power  of  legal  might, 
which  has  such  dominion  over  man,  will  wither  before  the 
higher  power  of  right. 

37 


290 


CONCLUSION. 


IN  the  previous  pages,  the  discussion  of  the  rights  of 
labor  and  capital  has  been  prosecuted  with  the  sole  view 
of  convincing  the  public  that  they  are  very  unequally  pro- 
tected ;  that  the  rapid  increase  of  capital  by  per  centage, 
now  favored  by  monetary  laws,  while  it  stimulates  the  en- 
terprise of  the  few,  and  naturally  and  inevitably  secures 
to  them  great  wealth,  represses  and  cripples  the  enter- 
prise of  the  great  mass  of  the  people,  tending  to  pauper- 
ism, crime,  and  indirectly,  but  certainly,  to  the  overthrow 
of  any  and  every  government,  which,  disregarding  the  ratio 
of  the  actual  increase  of  property  by  labor,  shall  give  the 
preference  to  capital ;  that  justice  to  labor,  while  it  secures 
individual  comfort  and  happiness  to  all  who  are  able  and 
willing  to  work,  will  rapidly  develop  the  highest  qualities 
of  our  nature,  and  all  the  resources  of  our  country,  and 
greatly  increase  the  national  wealth ;  that  it  will  give  to 
civilization  an  impetus  such  as  the  world  has  never  seen, 
and  relieve  it  from  one  of  its  hardest  conditions,  that  of 
creating  desires  and  necessities  which  it  provides  no  means 
to  gratify ;  that  it  will  silence  at  once  and  forever  the 
doubt  so  often  felt  and  spoken,  whether  the  happiness  of 
the  mass  of  men  has  been  promoted  or  not  by  the  change 
from  the  savage  to  the  civilized  state. 

It  has  been  shown  that  labor  constitutes  the  real  treas- 
ure of  a  nation,  and  without  claiming  for  it  anything  more 


291 


than  its  natural  rights,  it  is  insisted  that  these  should  be 
guarded  by  the  most  jealous  care  of  government. 

It  has  also  been  shown  that  under  existing  monetary 
laws,  labor  is  not  and  cannot  be  properly  rewarded. 
Change  is  indispensable,  and  fortunately  it  fcan  be  effected 
without  altering  the  constitution  of  the  United  States, 
without  the  slightest  disturbance  to  the  present  institutions 
of  society,  or  real  injury  to  any  one. 

It  is  now  for  the  American  people,  who  have  founded 
their  government  upon  the  principles  of  equality  and  free- 
dom, to  establish  the  rights  of  labor,  which  have  been 
nearly  disregarded  in  all  previous  time,  and  only  cared  foi 
as  they  served  to  minister  to  the  ambition  and  luxury  of 
courts  and  nobles.  Let  the  social  position  of  the  laborer, 
to  which  he  is  entitled  by  the  ordination  of  'God  in  the 
laws  of  nature,  be  ascertained  and  recognized,  and  pov- 
erty, crime,  and  most  other  political  and  social  evils,  will 
give  place  to  competency,  virtue,  and  happiness. 

The  facts  contained  in  this  volume  show  plainly  that 
our  monetary  system  favors  the  rapid  concentration  of 
capital  in  opposition  to  the  rights  of  labor,  and  we  deem 
it  warrantable  to  assume,  that  nearly  all  who  shall  care- 
fully examine  the  subject,  will  be  convinced  that  our 
present  laws  of  distribution  are  continually  doing  a  great 
wrong  to  the  people. 

Nothing  more  simple  than  the  Safety  Fund  need  be  de- 
sired, and  the  more  it  is  considered,  the  more  adequate  it 
will  appear  to  distribute  wealth  to  those  whose  labor  earns 
it.  This  system  will  as  certainly  reward  labor,  as  the  one 
now  in  force  has  oppressed  it.  It  will  infringe  no  rights 
of  property.  The  owners  of  wealth  will  continue  in  un- 


292 


disturbed  possession.  They  will  be  able  to  loan  their 
money  and  rent  their  property  as  readily  at  one  and  one- 
tenth  per  cent  as  now  at  six  or  seven  per  cent.  The  dol- 
lar received  by  the  rich  man  in  interest  or  rent  will  pur- 
chase as  much  as  the  dollar  earned  by  the  laborer ;  pre- 
cisely as  at  the  present  rates  of  interest.  Land-owners  will 
be  at  liberty  to  rent  the  soil  to  tenants,  work  it  them- 
selves, or  leave  it  untilled,  according  to  their  own  pleas- 
ure :  the  low  rate  of  interest  will  not  prevent  its  yielding 
crops.  Capitalists  will  not  be  required  to  favor  laborers, 
nor  to  give  them  employment,  nor  to  diminish  the  hours 
of  toil.  Capitalists  and  laborers  will  be  free  to  make  their 
own  agreements  on  these  points.  The  Safety  Fund  con- 
templates no  agrarian  distribution.  Neither  individuals 
nor  the  government  are  required  to  distribute  their  lands 
or  property,  or  to  contribute  money  to  the  support  of 
laborers.  Laborers  will  need  no  favors.  They  only  re- 
quire that  the  government  establish  a  just  standard  of  val- 
ue, which  will  allow  them  to  possess  an  equitable  share 
of  the  fruits  of  their  labor. 

Who  are  those  directly  interested  in  the  adoption  of  the 
Safety  Fund  ?  All  agriculturists,  manufacturers,  mechan- 
ics, planters,  in  short,  all  who  wish  to  earn  a  support  by 
honest  industry.  Merchants  will  do  a  safe  business  in  ex- 
changing products,  and  their  profits  will  be  moderate  and 
sure.  Nine-tenths  of  our  whole  population  will  receive 
the  pecuniary  benefit  which  is  justly  their  due,  and  the 
remaining  one-tenth  will  be  left  in  undisturbed  possession 
of  their  present  wealth,  and  like  their  fellow-citizens,  at 
liberty  to  increase  it  by  any  useful  employment.  The  de- 
sire of  capitalists  to  accumulate  is  often  owing  to  the  wish 


293 


to  leave  large  fortunes  to  their  children.  But  if  they  rightly 
consider  the  instability  of  wealth,  they  cannot  expect  all,  or 
even  one-fourth  of  their  posterity  to  remain  rich.  Will  it 
not  be,  to  reasonable  men?a  thousand  times  more  consoling 
to  leave  such  laws,  as  with  a  moderate  amount  of  labor 
will  secure  to  their  whole  posterity  the  comforts  of  life 
and  the  means  of  education,  than  to  leave  to  their  children 
the  money  and  the  present  monetary  laws,  which  must  in 
a  few  years  compel  the  larger  part  to  toil  incessantly  for 
a  scanty  subsistence,  and  deprive  them  of  mental  and  so- 
cial culture  ?  •  Are  not  just  laws  a  far  greater  blessing  to 
transmit  than  any  amount  of  wealth  ?  It  is  believed  that 
many  among  the  rich,  perceiving  the  justice  and  benefi- 
cence of  this  system,  will  be  found  among  its  most  ardent 
supporters. 

The  means  necessary  to  put  in  operation  and  sustain 
the  Safety  Fund  are  not  confined  to  the  few  capitalists 
who  now  control  the  currency,  and  furnish  the  government 
and  the  people  with  money.  Our  farmers  and  mechanics 
alone  have  sufficient  landed  estate  to  secure  several  times 
the  necessary  amount  of  currency.  The  only  thing  re- 
quired is  a  law  of  Congress  adopting  this  system.  This 
must  be  effected  directly  by  petition,  and  by  making  the 
measure  a  leading  question,  the  people  voting  only  for 
men  who  will  use  their  influence  in  favor  of  it.  Every 
one,  thoroughly  convinced  of  the  truth  of  the  positions 
taken  in  this  book,  can  do  something  in  diffusing  a  know- 
ledge of  them  among  his  friends  and  neighbors,  to  a  great- 
er or  less  extent.  The  most  effectual  way  to  excite  in- 
terest, and  give  it  prominence,  is  to  call  public  meetings 
and  lecture  upon  the  subject.  The  objects  which  will  be 


, 

IF; 

294 


secured  by  its  establishment,  are  so  evidently  in  accord- 
ance with  the  principles  and  aims  of  the  Christian  reli- 
gion, that  ministers  of  the  Gospel  cannot  fail  to  advocate 
it  with  the  same  zeal  that  they  advocate  peace,  justice,  and 
good-will  among  men ;  nor  can  statesmen  who  legislate  for 
the  well-being  of  their  countrymen,  refuse  it  their  support. 
Every  public  newspaper  has  great  power  to  awaken  the 
attention  of  the  people,  and  to  disseminate  a  knowledge 
of  this  new  monetary  system,  and  their  aid  would  greatly 
hasten  its  adoption.  But  more  than  all,  let  farmers,  me- 
chanics, and  all  men  who  earn  their  living  by  labor,  de- 
termine that  Congress  shall  legislate  so  as  to  do  them 
justice. 


295 


APPENDIX. 


THE  FRENCH  REVOLUTION  OF  1848. 

THE  recent  adoption  of  republican  institutions  by  the 
French  people  has  excited  a  deep  interest  in  this  country, 
and  in  every  part  of  the  civilized  world.  "  What  were 
their  complaints  against  the  late  government  ?"  and  "  Will 
the  adoption  of  a  republican  form  of  government  remove 
these  complaints  ?"  are  questions  that  must  be  answered 
before  any  satisfactory  conclusion  can  be  formed  respect- 
ing the  permanence  of  the  new  government.  It  is,  there- 
fore, proposed  to  consider  briefly  these  two  paramount 
questions. 

What,  then,  were  the  causes  of  complaint  ?  Numerous 
as  they  may  have  been,  they  may  all  be  traced  to  one 
source,  inequality  of  condition.  This  inequality  appeared 
on  all  sides.  The  royal  family  and  the  aristocracy  consti- 
tuted a  class  at  an  almost  infinite  remove  from  the  com- 
mon laborer ;  while  the  middle  class,  as  its  name  imports, 
lay  between  these  two  extremes.  Nearly  all  lucrative 
offices  and  posts  of  honor  were  in  the  hands  of  the  first 
class ;  a  few  were  distributed  to  the  second,  and  none  to 
the  third.  Among  the  ambitious,  it  was  doubtless  a  source 


296 


of  discontent  that  the  hope  of  political  distinction  was  con- 
fined to  these  narrow  limits.  But  this  source  of  complaint, 
although  it  probably  had  its  influence  upon  some  minds, 
appears  not  to  have  been  the  actual  cause  of  the  recent 
revolution. 

It  is  evident  that  the  true  cause  was  the  oppression  of 
labor.  Besides  providing  for  their  own  subsistence,  labor- 
ers were  compelled  to  support  a  multitude  of  non-pro- 
ducers, to  pay  the  taxes  necessary  to  support  an  extrava- 
gant government,  a  numerous  army  and  navy,  and,  in 
addition  to  these,  the  interest  on  a  large  national  debt. 
That  laborers  could  not  do  this  was  not  their  fault,  and  it 
is  not  surprising  that  they  overthrew  their  former  govern- 
ment and  established  the  present,  in  the  hope  of  improv- 
ing their  condition. 

It  is  only  necessary  to  examine  how  far  the  present 
government  meets  the  wants  and  just  hopes  of  the  peo- 
ple, to  determine  the  question  of  its  permanence.  The 
new  government,  by  establishing  universal  suffrage  and 
eligibility  to  office,  has  accomplished  everything  in  re- 
spect to  political  equality  that  can  be  desired.  This 
cause  of  complaint  is,  therefore,  entirely  removed.  But 
it  has  been  stated  that  political  inequality  was  not  the 
immediate,  the  actual  cause  of  the  revolution.  This  was 
the  deprivation  of  the  just  rewards  of  labor,  produced 
by  an  unjust  monetary  system,  which  gave  to  money 
the  power  to  appropriate  to  capital  what  justly  belonged 
to  labor.  How  has  the  new  government  met  this,  the 
principal  grievance  ?  Simply  by  increased  taxation,  pre- 
sent and  prospective ;  an  increased  public  debt,  and  in- 
creased rates  of  interest.  An  apology  may  be  found  in 


297 


the  exigencies  of  the  new  government,  but  the  chief  diffi- 
culty lies  in  the  fact  that  the  true  cause  of  the  oppression 
appears  not  to  have  been  perceived.  It  is  yet  uncertain 
whether  the  republic  will  discover  and  adopt  such  meas- 
ures as  will  justly  reward  labor.  It  is  clearly  certain  that 
the  principal  ground  of  complaint  still  continues,  and  may 
as  easily  exist  under  a  republic  as  under  a  monarchy ;  and 
that  unless  important  changes  in  the  monetary  laws  are 
introduced,  all  the  sacrifices  yet  made  will  have  been 
nearly  in  vain,  and  another  revolution  may  be  expected, 
accompanied  by  a  general  repudiation  of  debts,  and  the 
breaking  up  of  large  estates.  In  short,  it  may  be  ex- 
pected that  if  the  laborers  are  not  raised  to  a  higher  level, 
capitalists  will  be  reduced  to  a  lower ;  and  it  becomes 
every  well-wisher  of  the  new  government  to  urge  the 
timely  adoption  of  such  measures  as  will  avert  further  de- 
struction of  life  and  property,  by  removing  all  just  causes 
of  complaint.  It  has  been  shown  in  the  foregoing  treatise, 
that  the  law  regulating  the  rate  per  cent  interest  on  money 
is  the  true  cause  of  oppression  and  injustice  to  labor ;  and 
that  a  change  in  this  respect,  from  high  to  low,  so  as  to 
diminish  it  below  the  natural  increase  of  capital  by  labor, 
is  essential,  is  indispensable. 

This  reduction  of  interest  will  place  the  means  of  edu- 
cation within  reach  of  the  French  people  generally,  and 
thus  remove  the  often  repeated,  but  as  we  think,  unfounded 
objection,  that  the  ignorance  of  the  masses  disqualifies 
them  for  sustaining  a  republican  government.  It  is  ob- 
vious that  their  present  ignorance  is  owing  to  the  necessity 
of  continual  toil  for  food  and  shelter.  Will  a  father  and 
a  mother  who  are  hungry  themselves,  and  who  see  their 

38 


298 

children  pining  away  and  dying  of  starvation,  take  up  a 
book  and  teach  them  to  read,  instead  of  laboring  to  satisfy 
their  hunger  ?  It  is  not  the  fault  of  the  people  that  they  are 
uneducated ;  it  is  because  the  monetary  laws  are  such  as 
continually  to  appropriate  the  earnings  of  their  labor  to 
the  support  and  education  of  the  more  opulent.  But,  as 
we  have  said,  ignorant  as  the  laboring  classes  are,  they 
very  well  know  that  they  do  not  receive  the  just  reward 
of  their  labor,  and  no  government  can  be  permanent,  un- 
less the  legitimate  operation  of  its  political  system  is  to 
secure  the  rights  of  labor. 

The  Safety  Fund  is  recommended  to  the  French  gov- 
ernment ;  first,  because  it  strikes  at  the  root  of  the  cause 
that  produced  the  oppression,  and  will  therefore  prove  a 
sure  remedy  for  the  complaints  of  the  people ;  second, 
because  it  will  render  the  republic  stable,  and  to  political, 
add  social  freedom;  and  third,  because  it  will  insure 
peace  by  the  general  diffusion  of  competency,  intelligence, 
and  happiness. 


THE  END. 


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